Limited Two-Way Payment (LTP) Clause - an optional clause in the ISDA swap agreement that permits the non-defaulting party to avoid any net liabilities to the defaulting party while claiming any net balance due from the defaulting party. This clause has been criticized as inequitable by market participants and bankruptcy litigants. It is used less frequently than formerly, partly because some jurisdictions will not enforce netting agreements if a LTP clause is part of a master agreement. Also called Walkaway Clause. See also Full Two-Way Payment (FTP) Clause.
No contract containing a provision which permits a non-defaulting counterparty to make limited payments only, or no payments at all, to the estate of the defaulter, even if the defaulter is a net creditor (a "walkaway" clause), may be recognized as risk-reducing.
