Loan Forgiveness Agreement Template

Loan Forgiveness Agreement Template

This Loan Forgiveness Agreement (“Agreement”) is made as of [Date of Agreement].

1. Parties

Lender:
Full Legal Name: [Lender Full Legal Name]
Business Name (if applicable): [Lender Business Name]
Address: [Street Address, City, State/Province, ZIP/Postal Code, Country]
Phone: [Lender Phone Number]
Email: [Lender Email Address]

Borrower:
Full Legal Name: [Borrower Full Legal Name]
Business Name (if applicable): [Borrower Business Name]
Address: [Street Address, City, State/Province, ZIP/Postal Code, Country]
Phone: [Borrower Phone Number]
Email: [Borrower Email Address]

2. Background and Original Loan

2.1 Original Loan

The Lender previously extended a loan to the Borrower under the following agreement (the “Original Loan”):

• Name/Type of Agreement: [e.g., “Loan Agreement,” “Promissory Note”]

• Date of Original Loan: [Date]

• Original Principal Amount: [Original Principal Amount in figures and words]

2.2 Outstanding Balance

As of [Effective Date of Forgiveness], the total outstanding balance owed by the Borrower under the Original Loan is:

• Principal Outstanding: [Amount]

• Accrued but Unpaid Interest (if any): [Amount]

• Other Agreed Charges (if any): [Amount or “None”]

Total Outstanding Amount (“Outstanding Balance”): [Total Amount]

3. Forgiven Amount and Remaining Balance

3.1 Forgiven Amount

The Lender agrees to forgive and permanently release the Borrower from the obligation to pay the following portion of the Outstanding Balance:

Forgiven Amount: [Amount in figures] ([Amount in words])

3.2 Remaining Balance

After applying the Forgiven Amount, the remaining balance under the Original Loan is:

Remaining Balance: [Amount in figures] ([Amount in words])

Select one option and complete:

• ☐ The Remaining Balance is also forgiven in full. After this Agreement takes effect, no further amounts will be due under the Original Loan.

• ☐ The Remaining Balance will continue to be owed by the Borrower under the terms of the Original Loan, as modified by any changes in this Agreement.

4. Effective Date and Conditions of Forgiveness

4.1 Effective Date

The loan forgiveness described in this Agreement will take effect on:

Effective Date of Forgiveness: [MM/DD/YYYY]

4.2 Conditions (If Any)

If the loan forgiveness is conditional, describe the conditions here (for example, payment of a reduced settlement amount, return of collateral, completion of certain actions):

Conditions to Forgiveness (if applicable):

• [Condition 1]

• [Condition 2]

• [Condition 3]

Unless otherwise stated in this Section, the forgiveness becomes effective on the Effective Date without further action.

5. Treatment of the Original Loan Agreement

5.1 Continuing Effect

Except as expressly modified by this Agreement, the Original Loan remains in effect for any Remaining Balance, if any.

5.2 Full Settlement (If Applicable)

If the Remaining Balance is also forgiven (Section 3.2), the parties acknowledge that:

• The Original Loan is fully settled and satisfied as of the Effective Date; and

• No further payments will be due under the Original Loan, subject to Section 6 (Releases).

6. Releases and No Further Claims

6.1 Lender’s Release of Borrower

To the extent permitted by applicable law and subject to any Remaining Balance that continues to be owed, the Lender releases and forever discharges the Borrower from any and all claims, demands, and causes of action arising out of or relating solely to the Forgiven Amount of the Original Loan.

If the Entire Outstanding Balance is forgiven, the Lender’s release applies to the full Original Loan.

6.2 Borrower’s Release of Lender (Optional)

If selected, the Borrower also releases the Lender from claims relating to the Original Loan, except for obligations created by this Agreement:

• ☐ Borrower provides a mutual release of the Lender regarding the Original Loan, except for obligations under this Agreement.

• ☐ Borrower does not provide a separate release of the Lender at this time.

6.3 No Admission

This Agreement and any forgiveness under it are not an admission of wrongdoing or liability by either party. They are a compromise and adjustment of the Original Loan.

7. Tax Matters

The parties understand that forgiveness of debt may have tax consequences, including possible treatment of the Forgiven Amount as taxable income to the Borrower, depending on applicable law and the Borrower’s circumstances.

Each party is responsible for their own tax, accounting, and reporting obligations. Nothing in this Agreement is tax advice. The parties may consult their own tax or legal advisors if they have questions about how this forgiveness should be treated.

8. Representations and Confirmations

8.1 Authority and Capacity

Each party represents that:

• They have the legal capacity and authority to enter into this Agreement.

• If signing on behalf of a business, they are properly authorized to bind that business.

8.2 Understanding

Each party confirms that:

• They have read this Agreement and understand its terms.

• They are entering into this Agreement voluntarily and not under duress.

• They have had an opportunity to ask questions or seek independent advice before signing.

9. Confidentiality (Optional)

Select if applicable:

• ☐ The parties agree to keep the terms of this Agreement reasonably confidential and not to disclose them to third parties, except to their advisors, tax authorities, or as required by law.

• ☐ No special confidentiality obligations are imposed beyond those required by law.

10. Governing Law and Disputes

Governing Law:
This Agreement is governed by the laws of [State/Province, Country], without regard to conflict-of-law rules, unless the parties specify a different governing law here: [Alternative Governing Law, if any].

Any disputes arising out of or related to this Agreement will be handled in accordance with applicable law in the chosen jurisdiction.

11. Entire Agreement and Amendments

11.1 Entire Agreement

This Agreement, together with the Original Loan (to the extent it remains in effect), contains the entire understanding of the parties about the forgiveness of the loan described in Section 2. It replaces any prior oral or written discussions about forgiveness of this specific loan.

11.2 Amendments

Any change to this Agreement must be in writing and signed by both the Lender and the Borrower.

11.3 No Waiver

If either party does not enforce a right under this Agreement at a particular time, that does not waive the right to enforce it later.

12. Notices

Any notices under this Agreement must be in writing and sent to the addresses or email addresses listed in Section 1, unless a party gives updated contact details in writing.

Permitted methods include:

• Personal delivery;

• Mail or courier;

• Email, if both parties regularly use email and agree to receive notices electronically.

13. Signatures

By signing below, the parties agree to be bound by the terms of this Loan Forgiveness Agreement.

Lender:
Signature: _______________________________
Printed Name: [Lender Full Legal Name]
Title (if signing for a business): [Title]
Date: [MM/DD/YYYY]

Borrower:
Signature: _______________________________
Printed Name: [Borrower Full Legal Name]
Title (if signing for a business): [Title]
Date: [MM/DD/YYYY]

Witnesses (If Used)

Witness 1:
Signature: _______________________________
Printed Name: [Witness 1 Full Legal Name]
Address: [Witness 1 Address]
Date: [MM/DD/YYYY]

Witness 2 (if required):
Signature: _______________________________
Printed Name: [Witness 2 Full Legal Name]
Address: [Witness 2 Address]
Date: [MM/DD/YYYY]

Notary Acknowledgment (If Required)

State/Province of [State/Province]
County of [County]

On [Date], before me, [Notary Full Name], a Notary Public, personally appeared [Lender Full Legal Name] and [Borrower Full Legal Name], who proved their identities on the basis of satisfactory evidence and acknowledged that they executed this Loan Forgiveness Agreement for the purposes stated in it.

Notary Public Signature: _______________________________
Notary Public Printed Name: [Notary Full Legal Name]
My Commission Expires: [Date]
Notary Seal: ☐