Forbearance Agreement Template

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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