This page explains New York law. A forbearance agreement is a contract in which a lender agrees not to exercise its default remedies for a time, on conditions. It can be the right move: it buys time to refinance, sell or recover. But it is drafted by the lender, and its value depends on reading what it costs. KOR Law LLP's debtor and creditor practice represents borrowers, guarantors and lenders in the loan disputes these agreements are meant to resolve, and in the ones that follow when they fail.
What do forbearance agreements usually contain?
| Term | What it does | Why it matters |
|---|---|---|
| Acknowledgment of debt and default | Borrower and guarantors confirm the amount owed and that a default occurred | A signed acknowledgment can take a debt out of the limitations period (General Obligations Law 17-101) |
| Waiver of the statute of limitations | Promise not to plead limitations | Effective if made after the claim accrued, in a signed writing, for the period 17-103 allows; for mortgage foreclosures, 17-105 governs |
| Waiver of defenses and counterclaims | Gives up existing challenges to the loan | New York enforces clear waivers, especially in absolute and unconditional guaranties (Navarro, 2015) |
| General release of the lender | Releases claims you may have against the lender | A release is one of the grounds for dismissing a later claim (CPLR 3211(a)(5)) |
| Reaffirmation or new guaranties | Guarantors confirm, expand or add personal liability | A guaranty must be a signed writing (General Obligations Law 5-701(a)(2)); a reaffirmation can widen what it covers |
| Post-default UCC waivers | Waives notice of a collateral sale or the right to redeem | Those rights can be waived only by an agreement made after default (UCC 9-624) |
| Fees, default interest and milestones | Adds costs and deadlines; a missed milestone ends the forbearance | Interest on a forbearance counts toward usury limits for smaller loans (General Obligations Law 5-501) |
How do you approach a forbearance offer, step by step?
- Read the recitals. The opening "whereas" paragraphs usually state the amount owed and the defaults. Check every number and every listed default; once signed, they are acknowledgments.
- Find the waiver and release paragraphs. Identify what defenses, claims and rights are given up, and whether the release covers only the lender or also its servicers, affiliates and successors.
- Find the limitations language. Look for any acknowledgment, promise to pay or promise not to plead the statute of limitations (General Obligations Law 17-101, 17-103, 17-105).
- Read the guaranty provisions. Note whether existing guaranties are reaffirmed, increased or extended to new obligations, and whether new guarantors are added.
- List the conditions and milestones. Payment dates, refinancing or sale deadlines, reporting duties and cash management terms, and what counts as a "termination event."
- Check what happens at the end. On a termination event, many agreements let the lender resume remedies at once, sometimes with consent to a receiver or to a sale on shortened notice.
- Negotiate. Common asks include accurate recitals, a mutual or narrowed release, no new guaranties, a reasonable cure period before termination, and no waiver of notice or redemption rights.
How does a forbearance affect the statute of limitations?
This is where borrowers and guarantors most often lose ground without noticing. New York requires a signed writing to revive or extend a claim: an acknowledgment or promise "contained in a writing signed by the party to be charged" is the only competent evidence of a new or continuing contract that takes a claim out of the limitations period (General Obligations Law 17-101). A forbearance agreement is exactly such a writing. In addition, a written promise to waive or extend the limitations period, made after the claim accrued, lets the lender sue within the period that would apply if the claim had arisen on the date of the promise (General Obligations Law 17-103(1)).
Mortgage foreclosures have their own rules. A signed written waiver, a promise not to plead limitations, or a promise to pay the mortgage debt, made after the right to foreclose accrued, makes the foreclosure period run from that date, and no other acknowledgment or agreement extends it (General Obligations Law 17-105(1), (4)). The full timing picture is on our page about how long a lender has to sue on a note or guaranty in New York. The foreclosure side is in how long a lender has to foreclose in New York.
Can the forbearance be changed or ended by a phone call?
Usually not. A written agreement that says it cannot be changed orally can be changed only by a writing signed by the party against whom the change is enforced (General Obligations Law 15-301(1)). And a written modification or discharge is valid without new consideration if it is in writing and signed by the party against whom it is enforced (General Obligations Law 5-1103). In practice: get every extension, waiver of a missed milestone, or consent to a sale in a signed writing from the lender, and assume the lender will hold you to the signed text.
When does a forbearance make sense?
A forbearance is a trade, and it is worth weighing like one. It tends to make sense when the extra time is long enough to do something real, such as close a refinancing, sell the property or collect a receivable, and when what is given up is modest: accurate recitals, a release limited to known issues, no new guaranties. It deserves more caution when the main thing the lender gains is a fresh limitations period, a waiver of defenses that have real value, or new personal liability for guarantors. Compare it with the alternative: how long a lender's suit on the note or a foreclosure would realistically take, and what defenses would be available in each. A suit on the note or guaranty is described in what a CPLR 3213 motion is. A foreclosure is described in the firm's guide to what happens after you are served with a foreclosure summons.
What changes the answer?
- The exact words of the acknowledgment. Whether a writing restarts the clock depends on what it acknowledges or promises, and who signed it (General Obligations Law 17-101).
- The type of claim. Contract claims follow 17-103; mortgage foreclosures follow 17-105 and 17-107; expired consumer credit claims cannot be revived (CPLR 214-i).
- The waivers. New York courts enforce clear waivers in guaranties (Navarro). Article 9 rights to notice and redemption can be waived only after default (UCC 9-624), while many other Article 9 protections cannot be waived at all (UCC 9-602).
- New guaranty language. A reaffirmation that covers "all obligations" can extend a guaranty beyond the original loan; see what defenses a personal guarantor has when a New York lender sues.
- Loan size and pricing. Usury limits apply to a "loan or forbearance," but only below the dollar thresholds in General Obligations Law 5-501(6); see whether your commercial loan is usurious under New York law.
- What happens on termination. Consent to a receiver or to a fast collateral sale can shorten the path to the lender's remedies; see what happens after a lender declares a commercial loan in default.
For example: six months of time, six years of exposure
For example, imagine a borrower whose loan was accelerated in 2019, with a personal guaranty from its owner. (This is a made-up illustration, not a real client or result.) In 2024, with the six-year period on the accelerated debt close to running out, the lender offers six months of forbearance to let the owner refinance. The draft has the borrower and the guarantor "acknowledge and agree that the Indebtedness is due and owing without defense" and "waive the benefit of any statute of limitations."
Signed as drafted, those lines give the lender a signed acknowledgment and a post-accrual limitations waiver (General Obligations Law 17-101, 17-103(1)), which could give it a new six-year window running from 2024 on the contract claims. The owner's counsel asks to delete the waiver, to limit the acknowledgment to the amount of principal actually outstanding, and to state that nothing in the agreement extends any limitations period. Whether the lender agrees is a negotiation; the point is that the trade is visible before signing.
Common mistakes
- Signing the recitals without checking the numbers. They become your acknowledgment of the debt.
- Overlooking the limitations language. A short acknowledgment can do as much as an express waiver (General Obligations Law 17-101).
- Giving a general release for nothing. A release is one of the listed grounds for dismissing a later claim (CPLR 3211(a)(5)).
- Letting a guarantor sign "as reaffirmation" without reading the guaranty. The reaffirmation may expand it.
- Relying on oral extensions. Get them in a signed writing (General Obligations Law 15-301, 5-1103).
- Agreeing to a confession of judgment. Some forbearance packages include one; see whether a confession of judgment is enforceable in New York.
What to do this week
- Get the full draft forbearance agreement and every exhibit, including any reaffirmation of guaranty.
- Compare the stated balance and defaults with your own records.
- Mark every acknowledgment, waiver and release, and every new or reaffirmed guaranty.
- List the milestones and decide whether each is realistic.
- Work out where the limitations period stands on the debt today, before signing anything.
- Take the draft to a lawyer before signing; the documents to bring are listed in what to bring to a first meeting about a loan dispute.
Frequently asked questions
Is a forbearance agreement the same as a loan modification?
Not usually. A forbearance pauses the lender's remedies for a time without changing the loan's basic terms, while a modification changes the terms themselves. Either one, if in a signed writing, binds without new consideration (General Obligations Law 5-1103).
Can the lender use what I sign against me in court?
Yes. Signed acknowledgments, waivers and releases are written evidence the lender will rely on, including to answer a limitations defense (General Obligations Law 17-101, 17-103).
Does a forbearance stop the lender's lawsuit?
Only to the extent the agreement says. Some require the lender to adjourn or stay a pending case; others leave it running. Read the litigation paragraph closely.
Can a guarantor refuse to sign?
Yes, though the lender may refuse to forbear without the guarantor's reaffirmation. A guarantor who does not sign a new writing is not bound by new promises in it (General Obligations Law 5-701(a)(2), 15-301).
Does a home mortgage forbearance work the same way?
The contract principles are similar, but home loans in foreclosure come with settlement conference and federal servicing rules; see whether you can still get a loan modification after a New York foreclosure case starts.
What happens if I miss a milestone?
Most agreements treat it as a termination event that lets the lender resume its remedies immediately, so negotiate a cure period and get any extension in a signed writing.