Financial setbacks can happen to anyone. Job loss, medical emergencies, business downturns, or unexpected expenses can make it difficult to keep up with loan payments. In these situations, many borrowers and lenders turn to a forbearance agreement as a temporary solution.
At Champagne Law Firm, we help individuals, families, and business owners in Tennessee understand, negotiate, and implement forbearance agreements that protect their immediate needs while preserving long-term financial stability.
What Is a Forbearance Agreement?
A forbearance agreement is a formal, written agreement between a borrower and a lender in which the lender agrees to temporarily reduce or suspend loan payments. In exchange, the borrower commits to resuming regular payments (and often repaying the deferred amounts) after the forbearance period ends.
Forbearance is not loan forgiveness. Instead, it provides temporary relief by giving the borrower time to recover financially while keeping the loan from going into default.
How and When Can They Be Used?
Forbearance agreements are most often used in situations where the borrower is experiencing short-term financial hardship but expects to be able to catch up in the near future.
Examples include:
- Mortgage Loans – Homeowners facing temporary income loss can pause or reduce payments to avoid foreclosure.
- Student Loans – Borrowers experiencing financial difficulty may apply for temporary relief on federal or private student loans.
- Business Loans – Companies dealing with seasonal downturns or unexpected events may negotiate forbearance to stay afloat until revenues recover.
- Commercial Real Estate Loans – Investors and property owners may request forbearance when tenants default or rental income falls short.
Typically, a borrower must demonstrate financial hardship and a reasonable plan to resume payments when the forbearance ends.
Who Is Likely to Use Forbearance Agreements?
Forbearance agreements are used by a wide range of borrowers:
- Homeowners trying to prevent foreclosure while regaining financial stability.
- Students and graduates struggling to meet loan obligations.
- Small business owners facing cash flow problems due to seasonal income, market changes, or unforeseen challenges.
- Real estate investors and developers impacted by tenant vacancies or project delays.
Lenders may also prefer forbearance agreements because they offer a way to work with borrowers cooperatively rather than resorting to foreclosure or litigation, which can be costly and time-consuming.
Key Terms in a Forbearance Agreement
Every agreement should be tailored to the specific situation, but common provisions include:
- Length of Forbearance – How long payments will be paused or reduced.
- Repayment Plan – How deferred amounts will be repaid (lump sum, installment, or loan modification).
- Borrower Obligations – Conditions such as maintaining insurance, providing updated financial information, or making partial payments.
- Default Triggers – Circumstances that end the agreement early and allow the lender to pursue foreclosure or collection.
Because the details can have long-term consequences, borrowers should carefully review and negotiate terms before signing.
How Champagne Law Firm Can Help
Forbearance agreements can be lifesaving tools when used properly, but they are also legal contracts with serious implications. Without careful negotiation, borrowers may find themselves facing balloon payments or unfavorable terms at the end of the forbearance period.
At Champagne Law Firm, we help clients:
- Negotiate fair terms with lenders.
- Review agreements to ensure they align with long-term goals.
- Develop strategies for repayment or restructuring once forbearance ends.
- Protect property and assets by avoiding unnecessary defaults or foreclosure.
Attorney Kelly Champagne-Deutekom’s combined background as a financial advisor and attorney means she understands both the legal and financial sides of forbearance agreements—and how they fit into your broader financial picture.
Final Thoughts
A forbearance agreement can provide critical breathing room during financial hardship, allowing individuals and businesses to stabilize without losing their property or defaulting on obligations. But because these agreements carry significant long-term consequences, professional guidance is essential.
Contact Champagne Law Firm today to learn more about forbearance agreements and how we can help you protect your financial future. We proudly serve clients throughout Middle and East Tennessee, with offices in Nashville, Sevierville, and Rogersville. Call us at 865-228-8080 or contact us online to schedule a confidential consultation.
