Standing Tall When It Matters Most

Your guide to debt restructuring

Debt restructuring is a way for an entity, like a person or business, to manage their excess debt without going through bankruptcy. It is a useful financial tool with a lot of applications for Texas residents.

Restructuring Debt

When a person or company operates, they often borrow money to finance their projects. This might be in the form of a direct loan from a bank, a mortgage or other types of debt. The goal is that the loans provide funds up front to finish a profitable project, and then, the profits can go to repaying the debt, with some left over.

In some cases, the entity takes on too much debt and is unable to manage all the payments. The worst-case outcome from that is bankruptcy, which is very damaging and is a signal that there is no way to catch up on all the debt. Debt restructuring is a way to alter payments, extend the terms of loans, and make other changes that can make the total debt easier to pay off.

Give and take

This is not a free pass to avoid paying debt. A company trying debt restructuring might need to give up some equity to the bank in order to cancel or extend deadlines on some debt or agree to take on a higher total debt load in exchange for lowering payments. When done right, restructuring can help both the borrower and the lender by enabling the borrower to pay back the loan more easily without going bankrupt and not paying it at all.

A restructured debt load is an off-ramp before a company winds up in bankruptcy court, and it is an easier way to handle excess debt.