Debtor and Creditor Workout New Mexico, Part 1

What is a debtor and creditor workout and when is it a good alternative to bankruptcy?

What is a debtor and creditor workout?

A debtor and creditor workout is a written agreement modifying the terms of repayment on a debt. Also called non-bankruptcy workouts, a debtor and creditor workout can provide debt relief in two ways: through compositions and extensions.

• Compositions – in a composition, a creditor or creditors agree to accept partial repayment of a debt, and, in exchange, to forgive the full amount of the debt.
• Extensions – an extension simply gives a debtor more time to pay off a debt. However, an extension can still result in a debtor having more cash on hand, since a loan’s payment amount will drop when its term is extended.

The final agreement between a debtor and their creditors may consist of either compositions or extensions, or it may contain both.

Advantages of a debtor and creditor workout

• A non-bankruptcy workout is a less formal process than bankruptcy. This generally means fewer costs and fees.
• A non-bankruptcy workout avoids the stigma some people have around the idea of bankruptcy, as well as the credit score damage.
• A debtor and creditor workout does not affect the future possibility of bankruptcy, so if the agreement doesn’t work that option is still on the table.

Since rules governing workouts are more flexible, the discharge of debt from a workout can in some cases be even greater than the discharge from a bankruptcy filing.

Disadvantages of a debtor and creditor workout

Check back soon for Debtor and Creditor Workouts in New Mexico, Part 2

We are a debt relief agency and have practiced bankruptcy law for a combined 50 years. Our services include helping individuals and couples file for bankruptcy relief under the Bankruptcy Code.