Document background
A Debt Compromise Agreement is utilized when a debtor is unable to pay their debt in full under original terms, but where both parties wish to avoid formal insolvency proceedings. This document, governed by New Zealand law, provides a structured way to document an agreed compromise of debt, whether it involves a reduction in the total amount payable or a modification of payment terms. It's commonly used in both commercial and consumer contexts, offering protection for both creditors and debtors by clearly documenting the new arrangement. The agreement typically includes details of the original debt, the compromised amount, payment schedule, and consequences of default. It's particularly relevant when parties seek to maintain business relationships while resolving financial difficulties, and can be used alongside or as an alternative to other debt resolution mechanisms available under New Zealand law.
