Let`s say you owe $200,000 to your home, but you can`t afford mortgages anymore. Your lender closes on the house, and the property is sold for 180,000 $US. You are $20,000 less than the repayment of the $200,000 loan, so you have a $20,000 shortage. Within the oil and gas industry, debit contracts can often include a component of debit and default agreements to facilitate indirect financing alternatives. From: Cash-Mangel-Accord in The Handbook of International Financial Terms “You might think that your debts are behind you after a lender takes over your property, but that`s not always the case. Creditors may continue to try to collect on a property that you no longer own through default judgments. It is not uncommon for this term to be called a cash default agreement. For project finance sponsors, a deficit agreement indicates possible deficits due to insufficient labour capital or inflows of funds. In these cases, they can also be called a makeup agreement.
A deficit agreement is an agreement whereby a party makes funds available to an entity to cover any deficits resulting from cash or cash constraints allowing the entity to repay its debts. A default agreement usually has a cumulative limit set by the lending party. It may be possible to fight collection efforts or limit the amount that collectors can take, but you need an experienced lawyer to review your case. Bankruptcy could also be an option to eliminate a default judgment, but there will be side effects (including potential damage to your credit). If your lender is allowed to make a default judgment, there is no way to know whether it will or not. In many cases, this is not worth it for lenders and collection agencies. If your lender has a default judgment, it can take certain steps to collect. This may include: Pension accounts are generally not subject to default judgment, but check with a local lawyer to see if you are in danger. Collectors may ask you to voluntarily rob your pension accounts, but you are generally not required to do so by law. In some cases, it is best to protect this money from a pension account. In some cases, lack of judgment is not an option.