Forbearance Agreements

While the parties to any credit arrangement certainly anticipate that the borrower will fulfill its obligations with respect to timely repayment of amounts borrowed under the credit agreement and compliance with the various covenents and conditions included in the credit agreement it is not uncommon for problems to arise during the course of the relationship that lead to the borrower being in default.  At that point the the lender can obviously exercise its rights and remedies under the law including foreclosure and other legal actions; however, another alternative is for the lender to refrain, or forbear, from exercising its rights for a specified period of time to allow the borrower to fix any problems that may have led to the default.  The attached  report discusses the issues that arise when negotiating and finalizing a forbearance agreement.  In my next post I’ll provide a model form of forbearance agreement.

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