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Forbearance Agreement Template

Pause default enforcement and document cure terms clearly with this Forbearance Agreement Template.

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Forbearance Agreement Template

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Forbearance Agreement Template


This Forbearance Agreement (the “Agreement”) is entered into as of [Effective Date] by and between:

Lender/Creditor: [Lender Name], with an address at [Address] (“Lender”).
Borrower/Debtor: [Borrower Name], with an address at [Address] (“Borrower”).

Lender and Borrower may be referred to individually as a “Party” and collectively as the “Parties.”


1. Background and Existing Obligations

1.1 Underlying Documents. This Agreement relates to:

  • [Loan/Note/Agreement name] dated [Date] (the “Loan Documents”).
    1.2 Obligation. Borrower owes Lender amounts under the Loan Documents, including principal, interest, and fees (the “Obligation”).
    1.3 Defaults. Events of default include: [Missed payment(s), covenant breach, etc.].
    1.4 Acknowledgment. Borrower acknowledges the Obligation is valid and enforceable, subject to applicable law.


2. Forbearance

2.1 Forbearance Period. Lender agrees to forbear from enforcing rights arising from the Defaults from [Start Date] through [End Date] (the “Forbearance Period”), provided Borrower meets the conditions of this Agreement.
2.2 No Waiver. Forbearance is temporary and is not a waiver of Lender’s rights, except as expressly stated.
2.3 Reservation of Rights. Lender reserves all rights and remedies under the Loan Documents and law.


3. Forbearance Payments and Cure Plan

3.1 Payments During Forbearance. Borrower will make the following payments during the Forbearance Period:

  • Payment schedule: [Dates and amounts]

  • Method: [ACH/wire/check]
    3.2 Cure Requirements. Borrower will cure the Defaults by: [Paying arrears, providing documents, meeting covenants] by [Date].
    3.3 Application of Payments. Payments will be applied to: ☐ Fees/costs first ☐ Interest ☐ Principal ☐ As stated in Loan Documents.
    3.4 Additional Fees (Optional). Borrower will pay a forbearance fee of $[__] by [Date].


4. Reporting and Covenants (Optional)

4.1 Financial Reporting. Borrower will provide: [Weekly cash report/monthly statements] by [Deadlines].
4.2 Operational Covenants. Borrower agrees to: [Maintain insurance, preserve collateral, limit additional debt].
4.3 Negative Covenants. Borrower will not: [Sell assets, make distributions] without Lender’s written consent.


5. Conditions to Forbear

5.1 Conditions. Lender’s forbearance is conditioned on:

  • No additional defaults during the Forbearance Period

  • Borrower’s timely payments under Section 3

  • Borrower maintaining required insurance (if applicable)

  • Accuracy of Borrower representations
    5.2 Failure of Conditions. If conditions fail, Lender may end forbearance and enforce rights immediately, subject to law.


6. Releases (Optional)

6.1 Borrower Release. To the extent permitted by law, Borrower releases Lender from claims arising on or before the Effective Date relating to the Loan Documents, except claims that cannot be waived by law.
6.2 No Admission. This Agreement is a compromise and is not an admission of wrongdoing by Lender.


7. Representations

7.1 Authority. Borrower represents it has authority to enter into this Agreement.
7.2 No Reliance (Optional). Borrower is not relying on statements not in this Agreement.
7.3 Accuracy. Borrower’s information provided to Lender is accurate to the best of Borrower’s knowledge.


8. Default Under This Agreement

8.1 Default Events. Default under this Agreement includes: missed payments, new default under Loan Documents, or breach of this Agreement.
8.2 Remedies. Upon default, Lender may exercise all rights under Loan Documents and law, including acceleration, foreclosure (if applicable), or collections.


9. Miscellaneous

9.1 Governing Law. This Agreement is governed by the laws of [State/Country].
9.2 Entire Agreement. This Agreement and the Loan Documents are the entire agreement about forbearance.
9.3 Amendments. Amendments must be in writing and signed by both Parties.
9.4 Severability. If any provision is unenforceable, the remainder remains effective.
9.5 Electronic Signatures. Electronic signatures are effective.


Signatures

By signing below, the Parties agree to this Forbearance Agreement as of the Effective Date.

Lender/Creditor: [Lender Name]
Authorized Signatory: [Name]
Title/Role: [Title]
Date: [Date]
Signature: ___________________________

Borrower/Debtor: [Borrower Name]
Authorized Signatory: [Name]
Title/Role: [Title]
Date: [Date]
Signature: ___________________________

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Forbearance Agreement Template

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For quick answers, scroll below to see the FAQ.

FORBEARANCE AGREEMENT TEMPLATE FAQ


What is a forbearance agreement?

A Forbearance Agreement is a contract where a lender (or creditor) agrees not to enforce certain rights after a borrower’s default for a limited period of time. In exchange, the borrower typically agrees to a cure plan, ongoing reporting, and reaffirmation of the debt.


When should you use a forbearance agreement?

Use it when a borrower has missed payments or breached loan terms, but both sides want to avoid immediate enforcement actions (like acceleration, foreclosure, or collections). It is common in commercial lending, vendor financing, and large past-due balances.


Does a forbearance agreement forgive the debt?

No. It usually does not forgive debt. It temporarily delays enforcement while the borrower follows the cure plan. The agreement often confirms the debt amount and states that rights are only paused, not waived.


What should a forbearance agreement include?

It should include: the underlying loan/obligation, the default events, forbearance period, required payments during forbearance, cure requirements, reporting and financial covenants (optional), conditions to forbear, what happens if there is another default, and releases (if used).


Are releases and acknowledgments common?

Yes. Lenders often require the borrower to acknowledge the debt and defaults and may request a release of claims against the lender. This template includes optional release language that can be adjusted.


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