Creditors’ Issues: Forbearance Agreements and Settlement Agreements

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Creditors and debtors often enter into agreements with respect to the repayment of indebtedness. These forbearance agreements or “standstill agreements” are useful tools whereby both creditors and debtors can work together to reach a common goal without the immediate need for realization of assets in a formal insolvency proceeding.

In contrast, a settlement agreement is designed to bring finality to all or some part of the credit arrangement with the debtor. As such, particular care has to be taken under a settlement agreement to insure that what is being settled and released does not affect other parties or other issues that are not being resolved under the agreement.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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