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Deed Of Subordination Template for United States

A Deed of Subordination is a legal document used in the United States that establishes the priority of debts between multiple creditors. It formally documents an agreement where one creditor (junior) agrees to subordinate their right to payment to another creditor (senior). This document is crucial in structured finance and debt arrangements, ensuring clear hierarchy of payment rights and enforcement provisions under U.S. state and federal laws.

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What is a Deed Of Subordination?

A Deed of Subordination becomes necessary when multiple creditors have claims against the same debtor and need to establish a clear hierarchy of payment rights. This document is particularly important in complex financing arrangements where new debt is being introduced or existing debt relationships need restructuring. The deed outlines payment priorities, enforcement rights, and procedures for various scenarios including default and bankruptcy. Under U.S. law, it must comply with both federal regulations (such as the UCC) and state-specific requirements.

What sections should be included in a Deed Of Subordination?

1. Parties: Identification of all parties involved: Senior Creditor, Junior Creditor, and Debtor

2. Background: Context of existing debts and reason for subordination

3. Definitions: Key terms including Senior Debt, Junior Debt, and Subordinated Obligations

4. Subordination Terms: Core provisions defining the subordination arrangement

5. Payment Restrictions: Conditions under which payments on junior debt are permitted or restricted

6. Enforcement Rights: Rights and limitations of parties regarding enforcement actions

What sections are optional to include in a Deed Of Subordination?

1. Turnover Provisions: Requirements for junior creditor to turn over received payments in violation of the subordination agreement

2. Bankruptcy Provisions: Special provisions governing rights and obligations of parties in bankruptcy scenarios

3. Future Advances: Provisions addressing treatment of additional senior debt and future lending arrangements

What schedules should be included in a Deed Of Subordination?

1. Schedule of Senior Debt: Detailed listing of all senior obligations and their terms

2. Schedule of Junior Debt: Detailed listing of all subordinated obligations and their terms

3. Security Documents: List of related security agreements and collateral documentation

4. Payment Terms Schedule: Specific payment arrangements and conditions for both senior and junior debt

Authors

Alex Denne

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

Jurisdiction

United States

Publisher

Genie AI

Cost

Free to use

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