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Simple English definitions for legal terms
workout
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A quick definition of workout:
Workout: A workout is when someone who owes money and the person they owe money to make a new agreement to pay back the debt. This new agreement might include changing the terms of the loan or forgiving some of the debt. It's a way to help the person who owes money get back on track and avoid defaulting on the loan.
A more thorough explanation:
Definition: A workout is an agreement made between a borrower and a lender to resolve a debt that is in default. This can be done by paying off the debt or through loan forgiveness. The workout agreement typically involves waiving any existing defaults and restructuring the loan's terms and conditions.
For example, if a borrower is unable to make their mortgage payments, they may enter into a workout agreement with their lender to modify the terms of the loan. This could involve reducing the interest rate, extending the loan term, or forgiving a portion of the debt.
Another example of a workout agreement is when a business is struggling to make payments on a loan. The lender may work with the business to restructure the loan, allowing for more manageable payments and avoiding default.
Overall, a workout agreement is a way for borrowers and lenders to work together to find a solution to a debt that is in default, rather than resorting to legal action or defaulting on the loan.