composition with creditors

(law) An agreement between an insolvent debtor and one or more creditors under which the creditors consent to accept less than the total amount of their claims in order to secure immediate payment. Creditors will usually prefer a composition if a debtor threatens to declare bankruptcy, because otherwise the creditors are likely to incur costs in making a legal claim against the debtor in a bankruptcy proceeding, payment of debts will be delayed during the proceeding, and the amount paid to each creditor will depend on the judicial decision in that proceeding.

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