Peterboro recently defaulted on a bank loan. To avoid a bankruptcy proceeding, the bank agreed to a composition. This composition would do which one of the following?
A) Forgive the loan payment in its entirety
B) Extend the due date on the missed loan payment
C) Reduce the amount of the loan payments so Peterboro can pay timely
D) Transfer some of Peterboro's assets to the bank in lieu of the loan payment
E) Transfer all the equity shares in Peterboro to the lending bank

Question

Quizplus · Accepted Answer

A composition is an agreement between a debtor and creditor where the creditor agrees to accept a reduced amount of payment from the debtor. In this case, the bank agreed to reduce the amount of loan payments so Peterboro can pay timely and avoid bankruptcy. Therefore, option C is the correct answer.

Peterboro Recently Defaulted on a Bank Loan