Subordination Agreement
Subordination Agreement
___________________________, referred to as SECURED PARTY, ___________________________, referred to as DEBTOR, and ___________________________, referred to as SENIOR CREDITOR, agree:
SECURED PARTY presently holds a security interest in the following property of the DEBTOR:
_______________________________________________________SECURED PARTY hereby agrees that its security interest in the above described goods shall be subordinated to, and of lesser dignity than the claim of SENIOR CREDITOR, provided however, that the total amount of such subordination shall not exceed $ ______ (_____________________ &___/100 dollars).
The parties hereto agree to execute and instruments reasonably requested by SECURED PARTY.
Dated: _____________________
____________________________________
Secured Party
____________________________________
Debtor
Subordination Agreement
Review ListThis review list is provided to inform you about this document in question and assist you in its preparation. Subordination agreements are called for in various legal situations.
1. Make multiple copies. Give one to each involved party. Keep copies in their related files.
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Frequently Asked Questions
What is a subordination agreement?
A subordination agreement is a legal contract in which a secured party agrees that its security interest in a debtor's property will be subordinated to, and of lesser dignity than, the claim of a senior creditor. The agreement specifies the property subject to the subordination and the maximum amount of the subordination. It is used in various legal situations to establish the priority of claims.
Who are the parties to a subordination agreement?
The parties to a subordination agreement are the secured party, the debtor, and the senior creditor. The secured party holds a security interest in the debtor's property and agrees to subordinate that interest to the senior creditor's claim. The debtor is the party whose property is subject to the security interest.
What does it mean to subordinate a security interest?
To subordinate a security interest means that the secured party agrees its security interest will be of lesser dignity than the claim of the senior creditor. This affects the priority of claims, typically in the event of debtor default or bankruptcy. The subordination is limited to the amount specified in the agreement.
How much can a subordination agreement cover?
The total amount of the subordination is limited to the dollar amount specified in the agreement. The agreement states that the subordination shall not exceed that amount. This cap is written in both numerical and written form.
What property is subject to a subordination agreement?
The property subject to the subordination is the debtor's property in which the secured party holds a security interest. The agreement includes a description of this property. The secured party agrees to subordinate its security interest in those goods.
What are the obligations of the parties under a subordination agreement?
The parties agree to execute any instruments reasonably requested by the secured party. This ensures that the subordination is properly documented and enforceable. The agreement is dated and signed by the secured party and the debtor.
When are subordination agreements used?
Subordination agreements are called for in various legal situations. They are used to establish the priority of claims among creditors. The specific situations are not detailed in the document, but they are common in financing arrangements.
How should copies of a subordination agreement be handled?
The review list advises making multiple copies of the agreement. One copy should be given to each involved party. Copies should be kept in their related files.
What is the purpose of the review list in a subordination agreement?
The review list is provided to inform you about the document and assist in its preparation. It highlights key considerations, such as making multiple copies and distributing them to the parties. It serves as a practical guide for completing the agreement.
Is a subordination agreement legally binding?
Yes, a subordination agreement is a legal contract that binds the parties who sign it. It is dated and signed by the secured party and the debtor. The agreement outlines the subordination of the security interest and the obligations of the parties.
