A San Jose bankruptcy attorney answers: What is a forbearance agreement?

When a borrower is behind on their mortgage and seeks a forbearance agreement, the forbearance agreement includes the new terms under which the two parties (typically the borrower and the lender) agree upon with regard to the borrower’s obligation to pay. The terms in the forbearance agreement refer to the mortgage amount that has been either been reduced by amount (temporarily, typically with the reduced amount attached at the end of the loan period); suspended for an amount of time, or sometimes the payment terms have been extended. Typically a forbearance agreement is reached at the request of the borrower in order to avoid a foreclosure sale on the property for which they owe the back debt.

Sometimes forbearance agreements are reached between a student/former student and the loaning institution that funded their school loan(s). In this instance the forbearance agreement typically states that the borrower is not obligated to pay the student loan off until they have either completed or discontinued their education, or for a pre-determined time period thereafter. The amount owed may include interest that accrues over time.

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