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Bankruptcy Lawyer FAQ: What is a non-bankruptcy workout?

Published on March 15th, 2020

When it comes to bankruptcy, there are many different terms that are commonly used. One of the less used terms is a ‘non-bankruptcy workout’, in some cases termed ‘workout’. This is used to describe a “modification of debt that has been negotiated between you and a creditor or debt collector”.  Organizing a non-bankruptcy workout will mean that you do not file for bankruptcy. Even though you are proceeding with a solution that proceeds bankruptcy, it is a good idea to have a bankruptcy lawyer guide you through the process. 

What is a non-bankruptcy workout?

In 2005, the United States Congress made massive changes to the process of filing for bankruptcy. In short, they made it more difficult or a person to get a fresh start by getting out of debt. From this point onwards, non-bankruptcy workouts became one of the go-to choices for individuals. These agreements are organized and structured by the debtor, creditor, and often a lawyer. The agreement lays out the debts and establishes a payment structure that is to be negotiated upon. 

Extensions and Compositions

Apart from being referred to as a workout or non-bankruptcy work, you might also hear a lawyer refer to them as an extension or composition. 

Composition – This is a contract between the debtor and a creditor who agrees to take a part of the payment as full satisfaction of the debt owed. For example, if you owe Creditor A $10,000, you might agree to pay $5,000; after which the debt is cleared. 

Extension – This is an agreement between the debtor and at least two creditors who agree to extend the time payments should be made for the debt owed. 

When it comes to non-bankruptcy workouts, many people will agree to compositions and extensions, depending on the creditor. Most states apply the same, or very similar, federal laws for these options. Bear in mind, both extensions and compositions are subject to rules laid out in the agreement. 

How a Non-Bankruptcy Workout Could Affect Creditors

In order for a non-bankruptcy workout agreement to be valid, there must be more than one creditor involved in the contract. That said, they do not have to agree on all the terms. Moreover, if a creditor does not agree to the workout, they can choose to pursue the debt through other means of collection. Once they do so, they forfeit the right to benefit from even a partial payment. In the event the individual does end up filing for bankruptcy, the creditor might receive nothing at all. 

The Pros and Cons of a Non-Bankruptcy Workout


  • You get the chance to discharge some or all of your debt
  • You avoid any stigmas that are commonly associated with bankruptcy
  • You do not forfeit your right to file for bankruptcy
  • Seeking a non-bankruptcy workout is voluntary


  • Because it is voluntary, some creditors will not agree to the workout
  • You might feel as if you’re at the mercy of creditors
  • The creditor can terminate the agreement

If you would like to know more about a non-bankruptcy workout, and whether it might be an option, call a bankruptcy lawyer, like a  Bankruptcy Law Firm Memphis, TN, from today.

Thank you to the experts at Darrell Castle & Associates for their input into bankruptcy law.

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