letter of leniency definition

letter of leniency

Type of deed of arrangement offer by some or all creditors of an insolvent debtor whereby they bind themselves to refrain from taking any legal action to recover their dues for a specified number of days. Its objective is to allow some time to the debtor to sell-off his or her assets, or make some other arrangement to settle the debts without being declared bankrupt. Also called letter of license.

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