Definition
A contract that changes the order in which creditors are paid, making one debt subordinate to another.
What to consider
- Understand how it affects the order in which creditors are paid.
- Consider its impact on your overall credit and financing options.
- Review the agreement details to assess the risk involved.
Real world scenarios
- When refinancing his home, Ethan signed a subordination agreement that established the order in which lenders would be repaid in case of default.
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