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Out of Court Workouts
An out of court workout is an agreement between a debtor and its creditors for payment of all or part of the debtor's obligations either in a single lump sum or over a period of time. The agreement is binding on all of the creditors of a particular debtor.
Because of the supremacy clause of the U.S. Constitution and because individuals and those who are partners in partnerships require a discharge as part of any workout, out of court workouts are only available to corporations and limited liability companies (LLCs). While limited partnerships may be able to utilize these provisions where the general partner of the limited partnership is a corporation with no significant assets, the out of court workout is almost exclusively limited to corporate entities.
Source: "Manual of Credit and Commercial Laws," edited by Charles M. Tatelbaum and John K. Pearson, available at the NACM Bookstore.