Advantages and disadvantages of debt restructuring

Companies use debt restructuring as an attempt to recover high debts. This useful tool adjusts the way debt payments are made. Debt restructuring may also include adjusting interest rates and changing the length of grace periods. People choose to have their businesses go through this process if they cannot keep up with their financial situation. It is different from bankruptcy in that it is less expensive and will not involve as great a loss of reputation. It also increases the chances that the business will succeed once it recovers. Businesses that end up filing for Chapter 7 bankruptcy only have a 20% chance of success in the next few years.

Restructuring debts will mean changing bill payments. This may mean lower monthly payments, lower interest rates, and longer grace periods. Creditors want to collect your money and are therefore generally open to adjusting the terms of the loans in order to continue receiving payments.

This form of debt payment is not an option for all companies. If a company risks debt restructuring and continues to fail, its only option may be bankruptcy. If the company originally made the decision to file for bankruptcy, it may have already been on the road to recovery at this point. Due to the confusing middle ground between choosing debt restructuring and filing for bankruptcy, people will seek the advice of an experienced bankruptcy attorney. Lawyers can investigate financial records and help decide if your debts can be settled at an affordable payment.