Balance and excerpt is an expression which commonly identifies a settlement agreement between the debtor and the creditor on the basis of which the debtor must pay an amount lower than the original amount and the creditor accepts it. This is essentially the willingness of the creditor to accept the sum offered by the debtor even if it is lower than what was agreed.
With this type of agreement, the creditor agrees to immediately collect a sum less than it should rather than waste time in executive recovery procedures with an uncertain outcome. Usually, the final payment is carried out in a single payment but the two interested parties could theoretically also agree on a deferred payment.
The significance of the balance and write-off for bank debts is the one, for the creditor, of being able to quickly recover a part of his debt whose total recovery would be at least uncertain. On the other hand, the debtor can obtain a quite substantial debt reduction.
A firm and written agreement could also be used to definitively close an executive process if, before making the sale, the debtor and creditor were able to agree to fix the repayment of the debt at a lower price.
At the time of closing the report, the two parties undertake to define the transaction conditions. With the agreement settled and debts written off, the debtor agrees to pay the agreed sum, naturally less than the original amount, and the creditor accepts, thus freeing the debtor from any obligation towards him.
The agreement can be stipulated both between private individuals (non-payment of an invoice), and between private and bank , for example in the case of non-payment of a mortgage. Obviously, this kind of agreement must be drafted in writing as it is in effect to modify part of the original contract.
Usually, the balance and write-off should always be brought to the attention of a lawyer in order to protect both parties from unpleasant surprises, with the inclusion of a possible safeguard clause. Even the banks can accept the balance and write-off, but only in the event that the debtor’s position has previously been placed in “suffering” , which implies reporting the account holder to the Central Risk Office of the Bank of Mana or to the CRIF.