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Subordination Agreement Procedures

Debt subordination is common when borrowers attempt to acquire funds and credit agreements are concluded. Subordination agreements are usually made when property owners refinance their first mortgage. He cancels the initial loan, and a new one is written. As a result, the second loan becomes a priority debt and the primary loan a subordinated debt. In addition, all creditors are superior to shareholders in the preference for claims in the event of liquidation of a company`s assets. However, loans follow a chronological order in the absence of a subordination clause. It implies that the first recorded act of trust is considered higher than any subsequent recorded act of trust.