In order to prevent credit indebtedness, financial institutions, among others, widely use such a mechanism as debt restructuring. Its main purpose is to protect the financial interests of the creditor and to ensure avoidance of penalties and reputational losses for the debtor.
Debt restructuring: what is it?
In case of impossibility, in certain circumstances, the debtor to repay the financial obligation in a timely manner, the bank or other financial institution can offer its client a debt restructuring that will allow the client to repay the current loan and keep his credit history from negative records.
As a rule, the following measures can be applied within the restructuring process:
- changing the payment schedule under the previous loan agreement;
- extension of the term of the loan agreement;
- vacation holidays;
- changing the terms of the loan agreement (usually applied to foreign currency loan agreements, with significant currency fluctuations in the market).
However, one should be prepared for the fact that often banks put forward such restructuring conditions in which you do not receive any preferences, and the bank, on the contrary, even draws you a debt loop. Therefore, starting negotiations with the bank on the restructuring of the loan, it is necessary to have a clearly planned negotiation tactics, as well as an understanding of which option is most beneficial to you.
Among the typical examples of the restructuring of credit indebtedness in domestic practice are:
- restructuring, in which the penalty and interest are capitalized in the body of the loan, and as a consequence of the new, usually the increased body of the loan, accrued interest. This way of restructuring is one of the most disadvantageous and risky for clients, try to avoid it by all possible means;
- restructuring in which the penalty is written off, and the interest on the loan is capitalized in his body;
- restructuring, which results in a penalty and interest. This is the so-called “partial debt forgiveness”. This way of restructuring is ideal for the borrower, but in order to achieve such conditions, the bank will have to thoroughly substantiate its position;
- restructuring, when a voluntary sale of a pledge or mortgage object (usually car or real estate) is carried out. In this case, the penalty or part of the debt obligation is written off. In such a situation, the debtors usually resell the property under the encumbrance, the trustees, and pay the balance of the debt “in good faith”. Such a scheme, although it looks attractive, but carries a number of risks, to bypass or overcome what is almost impossible without qualified lawyer’s help.
If you or your business are in a difficult position and you really need debt restructuring, our highly qualified lawyers are ready to advise you on this matter and help to arrange a restructuring contract for the most favorable conditions for you.
Among the services provided by “SLS Group” on credit counseling:
- negotiation and execution of debt restructuring agreements;
- provision of legal protection from collectors;
- removal of illegally imposed arrest from property;
- termination of bail, cancellation of executive inscriptions and others.
Contact “SLS Group” lawyers, who will provide detailed legal advice, and help you find answers to these and other issues that concern you. You can register for a consultation or find out more information by telephone or through the feedback form.