What Are Workouts?
The term “workout” is used to describe a non-bankruptcy negotiated modification of debt. More simply stated, a workout is an agreement worked out between the debtor and his or her creditors for payment of the debts between them that is negotiated without all the bells and whistles, and perhaps the stigma, of the bankruptcy process. Workouts are sometimes called compositions or extensions. A composition is a contract between a debtor and two or more creditors in which the creditors agree to take a partial payment in full satisfaction of their claims. An extension is a contract between the debtor and two or more creditors in which the creditors agree to extend the time for payment of their claims. An agreement may be both a composition and an extension, or an agreement to accept less money over a longer period of time. The same laws govern both compositions and extensions. Both are subject more to contract law principles than debtor-creditor rules. Compositions and extensions must meet a
