Composition Agreement with Creditors -- Debtor to Carry on Business under Inspection by Creditors' Committee

• Category: Contracts - Composition with Creditors
• State: Multi-State
• Control #: US-0918BG
• Format: Word; Rich Text

Description

A composition with creditors is a common-law device for the compromise of debts. Pursuant to an agreement between an insolvent or financially embarrassed debtor and two or more creditors, the creditors, in consideration of an early payment, agree to discharge their respective claims on receipt of payment of a fraction of the amount the debtor actually owes. Additionally, a composition may take the form of an agreement by creditors to extend the time in which the debtor may pay the creditors' claims, or may consist in a total discharge of the debts. When executed, a composition operates as a complete discharge of the debtor as to all who share in it, and each assenting creditor is subsequently estopped from recovering on the original debt. Composition agreements for the relief of insolvent debtors have been superseded, to a great extent, by proceedings under the Federal Bankruptcy Act and various state insolvency laws. They are, however, still of considerable importance in some jurisdictions. A Composition Agreement with Creditors -- Debtor to Carry on Business under Inspection by Creditors' Committee is an agreement between a debtor and a creditors' committee in which the debtor agrees to continue operating their business under the supervision of the creditors' committee. This agreement is used when the debtor is unable to pay their debts in full and is looking to negotiate a settlement with their creditors. The agreement is structured so that the debtor continues to operate their business, while the creditors' committee oversees the business's operations and ensures that the debtor is compliant with the terms of the agreement. This type of agreement is also known as a debtor-in-possession plan or a DIP plan. There are two main types of Composition Agreement with Creditors -- Debtor to Carry on Business under Inspection by Creditors' Committee: an out-of-court agreement and a court-approved reorganization plan. An out-of-court agreement is negotiated between the debtor and the creditors' committee without the involvement of a court. A court-approved reorganization plan is a more formal arrangement that is ratified by a court.

A Composition Agreement with Creditors -- Debtor to Carry on Business under Inspection by Creditors' Committee is an agreement between a debtor and a creditors' committee in which the debtor agrees to continue operating their business under the supervision of the creditors' committee. This agreement is used when the debtor is unable to pay their debts in full and is looking to negotiate a settlement with their creditors. The agreement is structured so that the debtor continues to operate their business, while the creditors' committee oversees the business's operations and ensures that the debtor is compliant with the terms of the agreement. This type of agreement is also known as a debtor-in-possession plan or a DIP plan. There are two main types of Composition Agreement with Creditors -- Debtor to Carry on Business under Inspection by Creditors' Committee: an out-of-court agreement and a court-approved reorganization plan. An out-of-court agreement is negotiated between the debtor and the creditors' committee without the involvement of a court. A court-approved reorganization plan is a more formal arrangement that is ratified by a court.