A standstill agreement, also known as a forbearance agreement, is a legal contract between two parties that temporarily stops or “stands still” any further action or legal proceedings. This is usually done by the creditor or the lender to allow the debtor or borrower to get their finances in order before proceeding with any legal action.
In simpler terms, a standstill agreement is an agreement between two parties that temporarily puts a stop to any legal action. This agreement is common in business transactions where companies want to renegotiate their debts or seek new financing.
The purpose of a standstill agreement is to give both parties the time and space they need to negotiate and come to an agreement. Usually, the creditor or lender initiates the agreement to avoid taking any legal action against the debtor or borrower. In exchange for the standstill, the debtor or borrower agrees to make regular payments or take other actions that will resolve the debt or financial situation.
Under a standstill agreement, the debtor or borrower is usually given a grace period to resolve the financial situation. During this time, the creditor or lender agrees not to initiate any legal action against the debtor or borrower. This can include filing a lawsuit, seeking a default judgment, or foreclosure.
In some cases, the standstill agreement can also include a provision that prohibits the creditor or lender from contacting the debtor or borrower during the grace period. This is to avoid any undue pressure or harassment that might prevent the debtor or borrower from resolving the financial situation.
Standstill agreements are also common in mergers and acquisitions. In these cases, the acquiring company may agree to a standstill with the target company, allowing them to conduct due diligence and finalize the deal.
In conclusion, standstill agreements can be an effective way to resolve financial situations without the need for legal action. They provide both parties with the time they need to negotiate and come to an agreement, while also avoiding the costly and time-consuming process of litigation. If you find yourself in a financial situation that may result in legal action, consider reaching out to a lawyer to discuss whether a standstill agreement might be a good option for you.
