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Simple English definitions for legal terms
letter of license
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A quick definition of letter of license:
A letter of license is an agreement signed by all the creditors of a business that is having financial difficulties. This agreement allows the business more time to pay its debts and continue operating in the hopes of overcoming its financial problems. The letter also protects the business from being sued or arrested while it is in effect.
A more thorough explanation:
A letter of license is an agreement signed by all the creditors of a financially troubled business. This agreement grants the debtor more time to pay debts, allows the debtor to continue business in the hope of overcoming its financial distress, and protects the debtor from arrest, lawsuit, or other interference while the letter is in effect.
For example, if a business is struggling to pay its debts, it may negotiate a letter of license with its creditors. This agreement would give the business more time to pay its debts and protect it from legal action while it works to improve its financial situation.
Another example would be if an individual is struggling to pay their debts and enters into a debt management plan. As part of this plan, they may negotiate a letter of license with their creditors to give them more time to pay their debts and protect them from legal action.