Free template

Debt Subordination Agreement

Establish priority of debt repayment among creditors with this Debt Subordination Agreement Template.

Downloaded 4012 times

Debt Subordination Agreement

Debt Subordination Agreement Template


This Debt Subordination Agreement (“Agreement”) is entered into on [Date], by and between:

Senior Lender:
Name: __________________________
Address: __________________________
Email: __________________________
Phone: __________________________

Subordinated Lender:
Name: __________________________
Address: __________________________
Email: __________________________
Phone: __________________________

Borrower:
Name: __________________________
Address: __________________________
Email: __________________________
Phone: __________________________

Collectively referred to as the “Parties.”


1. Purpose

The purpose of this Agreement is to establish that the Subordinated Lender’s claims to the Borrower’s assets shall be subordinate to the Senior Lender’s claims, ensuring clear repayment priorities in the event of default or insolvency.


2. Subordination of Debt

  • The Subordinated Lender agrees that its rights to repayment are junior to the Senior Lender’s rights.

  • The Subordinated Debt includes all amounts currently owed or to be owed by the Borrower to the Subordinated Lender.

  • No payment shall be made on the Subordinated Debt unless the Senior Debt has been fully satisfied, except as otherwise authorized by the Senior Lender.


3. Restrictions on Subordinated Lender

The Subordinated Lender shall not:

  • Accept payments on the Subordinated Debt without Senior Lender consent.

  • Initiate legal proceedings to collect the Subordinated Debt while Senior Debt remains outstanding.

  • Secure additional collateral without written approval from the Senior Lender.


4. Representations and Warranties

Each Party represents and warrants that:

  • It has full authority to enter into this Agreement.

  • The execution of this Agreement does not violate any other contracts or legal obligations.


5. Default and Remedies

  • If the Borrower defaults on the Senior Debt, the Senior Lender may exercise all rights and remedies under applicable law.

  • The Subordinated Lender agrees to take no action that would interfere with the Senior Lender’s collection efforts.


6. Term and Termination

  • This Agreement remains in effect until the Senior Debt is fully repaid.

  • Termination requires written consent from all Parties.


7. Confidentiality

All financial information exchanged under this Agreement shall remain confidential and may not be disclosed to third parties without prior consent.


8. Governing Law

This Agreement shall be governed by the laws of [State/Country].


9. Dispute Resolution

Any disputes arising under this Agreement shall be resolved through mediation, and if necessary, binding arbitration.


10. Entire Agreement

This document constitutes the entire agreement between the Parties and supersedes all prior agreements and understandings.


Signatures

Senior Lender Signature: ____________________________ Date: _________
Printed Name & Title: _________________________________________

Subordinated Lender Signature: ____________________________ Date: _________
Printed Name & Title: _________________________________________

Borrower Signature: ____________________________ Date: _________
Printed Name & Title: _________________________________________

Generate

Generate
Generate

Debt Subordination Agreement

Debt Subordination Agreement
Debt Subordination Agreement

in seconds with AI

in seconds with AI
in seconds with AI

Save time and avoid mistakes!

Try for Free

Details

Learn more about

Debt Subordination Agreement

Click below for detailed info on the template.
For quick answers, scroll below to see the FAQ.

Click below for detailed info on the template.
For quick answers, scroll below to see the FAQ.

DEBT SUBORDINATION AGREEMENT FAQ


What is a Debt Subordination Agreement?

A Debt Subordination Agreement is a legal document where one lender agrees that their claim to a borrower's assets will be ranked below another lender's claim in case of default or bankruptcy. This establishes a clear repayment hierarchy.


Why is a Debt Subordination Agreement important?

It protects senior lenders by giving them priority in repayment and helps borrowers secure additional financing. It also reduces disputes between creditors by setting legally binding repayment rules.


When should you use a Debt Subordination Agreement?

Use this agreement when multiple lenders are involved in financing the same borrower, especially in mergers, acquisitions, or refinancing situations where debt priority matters.


What should a Debt Subordination Agreement include?

It should include details of the parties involved, the subordinated and senior debts, repayment terms, restrictions on the subordinated lender, and default provisions.


Who benefits from this agreement?

Senior creditors benefit from reduced risk, while borrowers benefit by attracting new financing. Subordinated creditors may gain access to lending opportunities they wouldn’t otherwise have without agreeing to subordination.


Need a customized Debt Subordination Agreement?

Use our AI-powered builder to generate a tailored agreement in minutes—professional, compliant, and ready for immediate use.

Similar templates

Other templates from

Financial Agreements

Money back guarantee

Free trial

Cancel anytime

AI Lawyer protects

your rights and wallet

🌐

Company

Learn

Terms

©2025 AI Lawyer. All rights reserved.

Money back guarantee

Free trial

Cancel anytime

AI Lawyer protects

your rights and wallet

🌐

Company

Learn

Terms

©2025 AI Lawyer. All rights reserved.

Money back guarantee

Free trial

Cancel anytime

AI Lawyer protects

your rights and wallet

🌐

Company

Learn

Terms

©2025 AI Lawyer

Money back guarantee

Free trial

Cancel anytime

AI Lawyer protects

your rights and wallet

🌐

Company

Learn

Terms

©2025 AI Lawyer. All rights reserved.