Header graphic for print
Lenders 360

Forbearance Agreement: What Are The Typical Terms?

Posted in Remedies, Tough Times for Lenders, Training

This is second in a series covering forbearance agreements.  Previously on TT4L (am I the only person missing Jack Bauer?) (so . . . in your next workout or default, simply ask yourself, "what would Jack Bauer do?" – actually, don’t . . . ), I discussed the "what is it" and "why do it" aspects of forbearance agreements.

Now we move on to some of the topics covered in, or terms of, a typical forbearance agreement.

So, what are the  . . . .

Key Terms of a Forbearance Agreement?

  • the forbearance period  will end upon what might be called a "Termination Event."  This typically include a bankruptcy (or insolvency), a "new" loan default or any other specific events (such as the failure to perform "new" obligations that are set forth in the Forbearance Agreement, as noted below)
  • Identify Borrower’s obligations during forbearance period. The Forbearance Agreement may modify or expand Borrower’s obligations under loan documents. For example, it is common to require payment of set amount per month during forbearance period, which amount may be more or less than pre-forbearance installments under loan andor to furnish new or additional information about the collateral or the key principal.
  • Lender’s obligation to forbear (i.e., to not exercise remedies) until the occurrence of a Termination Event
  • Rights and remedies of Lender upon Termination Event
  • Acknowledgment of balance due, existence of default(s), enforceability of loan documents, Lender’s rights and absence of defenses
  • Release by Borrower (and key principalguarantor) of any and all claims and causes of action up to and including the date of the forbearance agreement
  • Acknowledgment that forbearance agreement does not amend or modify the loan documents
  • Tolling provision if limitations will be an issue at the end of forbearance period

 

Finally, two sidebar comments -

 

If you have other favorite forbearance agreement provisions, or any war stories, please comment upon them below.

  • http://community.martindale.com/legal-groups/Industry/financial_services_distressed_investments/b/financial_services_distressed_investments-blog/archive/2010/12/07/negotiation-agreements-what-about-wa Financial Services: Distressed Investments

    Negotiation Agreements: What About Waivers of Claims & Defenses As A Key Term?

    Yesterday, I did a day trip to Los Angeles with Brian Morris , Greg Erwin & John Nolan . A life insurance