Defeasance

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DEFINITION of 'Defeasance'

A provision that voids a bond or loan when the borrower sets aside cash or bonds sufficient enough to service the borrower's debt.

Also referred to as "defease."

INVESTOPEDIA EXPLAINS 'Defeasance'

The borrower sets aside cash to pay off the bonds, therefore the outstanding debt and cash offset each other on the balance sheet and don't need to be recorded.

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