Get Adobe Flash player

Who Creates a Subordination Agreement

Facebook Twitter Email

A subordination agreement is a legal document that outlines the priority of different creditors` claims on a debtor`s assets. This agreement is essential for creditors because it specifies the order in which they will be repaid if the debtor defaults on their loans or becomes bankrupt.

So, who creates a subordination agreement? The answer is simple: it`s usually the creditors themselves who draft this agreement. In most cases, the senior creditors (those who have provided loans earlier) create subordination agreements to protect their interests.

Senior creditors include banks, private lenders, and other financial institutions that have provided loans to the debtor. They create subordination agreements when they want to lend additional funds to the debtor, but they are concerned about the possibility of default or bankruptcy.

The subordination agreement effectively places a lower priority on the senior creditors` claims on the debtor`s assets. This means that in the event of a default or bankruptcy, the senior creditors will be paid after the other creditors who have agreed to subordinate their claims.

It`s worth noting that subordination agreements can also be created by junior creditors. In this case, the junior creditor would subordinate their claim to the senior creditors` claims, effectively pushing their own claim down the priority list.

Subordination agreements can be complex legal documents that require careful attention to detail. That`s why it`s essential to work with an experienced attorney who can draft an agreement that meets the needs of all parties involved.

In conclusion, a subordination agreement is a crucial legal document in the world of lending and borrowing. It`s typically created by senior creditors who want to protect their interests in the event of default or bankruptcy. But junior creditors can also create subordination agreements to protect their own interests. If you need a subordination agreement, be sure to work with an experienced attorney who can help you navigate the process and ensure that your interests are protected.

Facebook Twitter Email

Comments are closed.