May an agreement to suspend payment on a distressed loan (also known as a “forbearance agreement”) be considered a restructure plan?
Probably not. Forbearance agreements are designed to bring the borrower current by either postponing or reducing loan payments. If a forbearance agreement does not increase the probability that the borrower’s operation will continue and it does not enable the borrower to maintain the lending relationship with the qualified lender, the forbearance agreement would not be a restructure plan as intended under borrower rights laws and regulations. Regardless, forbearance agreements should never require borrowers to surrender their rights.
