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Debt Settlement Contract

Debt Settlement Contract Template for India

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Key Requirements PROMPT example:

Debt Settlement Contract

"I need a Debt Settlement Contract for a manufacturing company that owes INR 50 lakhs to a bank, to be settled at 70% of the original amount through monthly installments starting March 2025, with provisions for early payment discounts and collateral security against company machinery."

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Document background
The Debt Settlement Contract serves as a crucial legal instrument in India's financial and business landscape, providing a structured framework for resolving outstanding debts through negotiated settlements. This document becomes necessary when a debtor cannot fulfill their original debt obligations and both parties agree to a reduced settlement amount or modified payment terms. The contract must comply with Indian contract law, particularly the Indian Contract Act, 1872, and related financial regulations such as the Recovery of Debts and Bankruptcy Act, 1993. It typically includes detailed information about the original debt, settlement terms, payment schedules, and release conditions. The document protects both creditor and debtor interests by clearly defining their rights, obligations, and the consequences of non-compliance.
Suggested Sections

1. Parties: Identification of the debtor and creditor with complete details including names, addresses, and registration numbers if applicable

2. Background: Context of the original debt, including its origin, initial amount, and current outstanding balance

3. Definitions: Definitions of key terms used throughout the agreement

4. Acknowledgment of Debt: Formal acknowledgment of the debt amount by the debtor

5. Settlement Amount: Agreed-upon amount for settlement, including any reduction from the original debt

6. Payment Terms: Detailed payment schedule, including installment amounts, due dates, and payment methods

7. Default Provisions: Consequences of default and remedies available to the creditor

8. Representations and Warranties: Statements of fact by both parties regarding their capacity and authority to enter into the agreement

9. Release Clause: Terms of release from the original debt upon completion of settlement payments

10. Governing Law and Jurisdiction: Specification of Indian law as governing law and jurisdiction for dispute resolution

Optional Sections

1. Guarantor Provisions: Required when a third party is guaranteeing the settlement payments

2. Security Provisions: Needed when any assets are being provided as security for the settlement amount

3. Multiple Creditor Terms: Required when settlement involves multiple creditors

4. Early Payment Provisions: Optional terms for early payment discounts or prepayment options

5. Confidentiality Clause: When parties wish to keep the settlement terms confidential

6. Insurance Requirements: When insurance is required to secure the settlement payments

7. Force Majeure: Optional protection against unforeseen circumstances affecting payment ability

Suggested Schedules

1. Schedule A - Debt Details: Detailed breakdown of the original debt, including principal, interest, and other charges

2. Schedule B - Payment Schedule: Comprehensive payment schedule with dates and amounts

3. Schedule C - Settlement Calculation: Calculation showing how the settlement amount was determined

4. Schedule D - Supporting Documents: List of original debt documents and related correspondence

5. Schedule E - Asset Details: Details of any assets provided as security (if applicable)

6. Appendix 1 - Payment Instructions: Detailed banking or payment information for settlement payments

7. Appendix 2 - Communication Protocol: Agreed procedures for notices and communications between parties

Authors

Alex Denne

Head of Growth (Open Source Law) @ ºÚÁÏÊÓƵ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
Relevant legal definitions








































Clauses




























Relevant Industries

Banking

Financial Services

Legal Services

Debt Collection

Corporate Finance

Real Estate

Manufacturing

Retail

Construction

Professional Services

Relevant Teams

Legal

Finance

Credit Control

Collections

Risk Management

Treasury

Compliance

Corporate Affairs

Debt Recovery

Account Management

Relevant Roles

Chief Financial Officer

Finance Manager

Credit Manager

Collections Manager

Legal Counsel

Corporate Lawyer

Debt Recovery Officer

Risk Manager

Account Manager

Treasury Manager

Financial Controller

Compliance Officer

Legal Director

Settlement Officer

Industries





Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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Debt Settlement Contract

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