This type of agreement is a bonding between the creditor and debitor that a person who gets the loan can repay the amount with interest to the creditor, in a flexible amount of time. This type of agreement solves the insolvency of the problem. For this debt agreement to be successful the communication should be successful between both the vendor as well as the customer. Most banks follow this method to prevent bankruptcy. Bankruptcy is a status of insolvency that a person or organization cannot repay its debts.

In ancient times if a man owed and he could not repay his debts, then he including his wife and children were forced to work as a labor until the creditor compensates the money borrowed by him. In many case the slaves were forced to serve beyond their deadline. There has been many modern laws formulized on debt restructuring but still there is a constant measure taken to prevent this. There are many laws available to take action against the debitor who charges more interest to the debitor than mentioned in the agreement. Most of the landlords take advantage of the poverty of the debitor and demand then more money to repay in short period of time.

The bankruptcy in large scale affects the country’s economy growth. The respective country should take necessary measures to prevent bankruptcy, declining their economy. Bankruptcy is considered as a white collar crime, but it differs from strategic bankruptcy. This will not be considered as a criminal act. The creditor can estimate the immovable assets of the debitor and if he can’t repay he can take necessary actions to liquidate the assets of the debitor through any means like auction and can recover his loan amount.