A composition with creditors is an agreement between an insolvent or embarrassed debtor and two or more of his or her creditors in which the creditors, for some consideration, such as an immediate payment, agree to accept that or a future payment in full satisfaction of their respective claims, even though the payment is less than the amount owing on their claims. Such a composition is a compromise for the settlement of debts already incurred and does not embrace an agreement to alter the obligation of a contract with respect to future performance, nor is it an arrangement to pay the creditors in full at a later date. However, in some jurisdictions a composition may consist of an agreement by the creditors to extend the time in which the debtor may pay their claims, or an agreement that no creditor will receive any part of his or her claim. Composition agreements have to a great extent been superseded by proceedings under the Federal Bankruptcy Act or by state insolvency laws.
An Extension Agreement among Debtor, Stockholders, Creditors, Secured Creditor, and Creditors' Committee -- Subordination of Creditors' Claims is a legal agreement that outlines the terms and conditions for subordinating the claims of creditors to the claims of a secured creditor. This type of agreement is typically used in the context of a corporate restructuring. The agreement outlines the rights of each party, with the secured creditor having priority over the claims of the unsecured creditors. The agreement also outlines the terms of the subordination, including the amount of money to be subordinated and the timeline in which the subordination must occur. The agreement may also contain provisions for the secured creditor to receive certain collateral or other security to secure its claims against the debtor. The agreement is typically negotiated between the debtor, stockholders, creditors, secured creditor, and the creditors' committee. The agreement is then signed by all the parties and is binding upon each of them. There are two common types of Extension Agreements among Debtor, Stockholders, Creditors, Secured Creditor, and Creditors' Committee -- Subordination of Creditors' Claims: 1. Subordination Agreement: This type of agreement outlines the terms and conditions of the subordination of claims and defines the rights of the secured creditor. 2. Subordination Agreement and Security Agreement: This type of agreement outlines the terms and conditions of the subordination of claims and defines the rights of the secured creditor, as well as providing for the secured creditor to receive certain collateral or other security to secure its claims against the debtor.
