Forbearance Agreement Template for Germany

A Forbearance Agreement helps when a borrower can't make their loan payments on time. It's a formal arrangement where the lender agrees to pause or modify payment terms temporarily, instead of taking immediate legal action under German debt collection laws (Zwangsvollstreckungsrecht).

These agreements are especially common in German banking and real estate sectors, giving struggling borrowers breathing room while protecting the lender's rights. The agreement typically outlines specific relief terms, new payment schedules, and what happens if the borrower doesn't follow the modified terms. Under BGB regulations, both parties must sign the agreement to make it legally binding.

Consider a Forbearance Agreement when your business faces temporary financial difficulties and needs flexibility with loan payments. This agreement becomes crucial when you spot early warning signs of cash flow problems but still maintain open communication with your lender under German banking regulations.

The timing is particularly important in sectors like manufacturing or real estate, where seasonal revenue fluctuations can impact payment schedules. Use it before defaulting on payments - German insolvency laws (Insolvenzordnung) offer more options for negotiations while the loan is still performing. This proactive approach helps preserve business relationships and avoid costly legal proceedings.

• Payment Deferral Agreements: Temporarily pause or reduce loan payments, common in German real estate financing
• Debt Restructuring Forbearance: Modifies original loan terms with new payment schedules and interest calculations
• Conditional Forbearance: Links payment relief to specific borrower actions or milestones under BGB requirements
• Short-term Emergency Agreements: Provides brief relief during unexpected business disruptions, typically 3-6 months
• Industry-specific Arrangements: Tailored terms for sectors like agriculture or manufacturing, addressing seasonal cash flows

• Banks and Financial Institutions: Primary lenders who offer Forbearance Agreements to struggling borrowers, following German banking regulations
• Business Owners: Companies seeking temporary relief from loan obligations during financial hardship
• Legal Counsel: Attorneys specializing in banking law who draft and review agreement terms
• Insolvency Administrators: Professionals who may recommend forbearance as part of restructuring plans
• Corporate Finance Officers: Company representatives who negotiate terms and monitor compliance
• Guarantors: Third parties who maintain their guarantee obligations under modified loan terms

• Loan Documentation: Gather original loan agreement, payment history, and current balance statements
• Financial Assessment: Document current financial situation and realistic payment capabilities
• Relief Terms: Define specific payment modifications, duration, and new schedule under German banking laws
• Security Details: Review existing collateral arrangements and any necessary adjustments
• Compliance Check: Ensure alignment with BGB requirements and banking regulations
• Default Provisions: Clearly outline consequences of breaching modified terms
• Signing Authority: Verify proper authorization for all parties involved

• Party Details: Full legal names, addresses, and roles of lender and borrower under German law
• Original Loan Reference: Details of the underlying credit agreement and current status
• Modified Terms: Clear specification of new payment schedule and temporary relief provisions
• Duration Clause: Explicit timeframe for the forbearance period
• Default Conditions: Specific triggers that void the agreement per BGB requirements
• Preservation of Rights: Statement maintaining lender's original contractual rights
• Governing Law: Express reference to German jurisdiction and applicable banking regulations
• Execution Requirements: Proper signature blocks and notarization details if needed

A Forbearance Agreement differs significantly from an Amendment Agreement in several key aspects under German law. While both modify existing contracts, their purposes and effects are distinct.

• Temporary vs. Permanent: Forbearance Agreements provide temporary relief from payment obligations, while Amendment Agreements permanently change original contract terms
• Legal Effect: Forbearance suspends enforcement rights without changing the underlying debt, whereas Amendments alter the fundamental contract terms
• Trigger Events: Forbearance typically responds to financial hardship, while Amendments address general business needs or changed circumstances
• Duration: Forbearance has a specific end date with clear revival conditions; Amendments continue indefinitely as part of the main agreement
• Enforcement Rights: Forbearance preserves the lender's original rights but delays their exercise; Amendments create new permanent rights and obligations