Publication date: 06.06.2024
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Debt reduction
Debt is a financial obligation or obligation owed by one party (the debtor) to another party (the creditor). Debt can be in the form of a loan, credit, bonds, debt for services or goods, etc.
The main characteristics of the debt include the amount owed, the interest rate, the repayment period and the payment terms. The debtor usually undertakes to return to the creditor a certain amount of money (principal debt) together with the interest paid for the use of the creditor's capital.
Debt can arise in various areas, such as personal finance (such as mortgages or credit cards), corporate finance (loans to businesses), public finance (national government debt), and international finance (loans to international financial organizations or other countries).
Debt management is important to ensure financial stability and economic development. Mismanagement of debt can lead to financial problems, bankruptcy and economic crises.
Debt restructuring is the process of reviewing the terms of debt repayment between the debtor and the creditor in order to change payment terms, repayment terms, interest rates or other terms of the agreement in order to ease the financial burden on the debtor and ensure his ability to repay debts.
The parties agree on new debt repayment terms that would be acceptable to both parties.
This may include lowering interest rates, extending repayment terms, or reducing the total amount of debt by rescheduling.In the case of corporate debt, this may mean converting debt into equity (for example, issuing new shares or bonds), reducing debt through the sale of assets, or restructuring financial liabilities.
In the case of public debt, restructuring may require negotiations between the government and international creditors to reach agreement on new debt repayment terms.
Debt restructuring is often used in situations of financial difficulty to prevent bankruptcy and resolve financial problems. However, this process can have important financial and legal implications for both parties to the deal, so it is important to conduct it carefully and with the interests of all stakeholders in mind.
How to arrange debt restructuring
The main steps for debt restructuring:
Contacting a financial institution:
The first step is to contact the lender or financial institution with which you have a loan and formally notify them of your need for restructuring. This can be done by submitting a written application or in a personal visit to the branch.
Submission of documents:
You may need documents confirming the circumstances that make you unable to pay the loan. This can include job loss, reduced income, health problems or other financial difficulties. The financial institution may request documents such as pay stubs, medical reports, or job loss documents.
Drawing up a restructuring agreement:
After considering your request, the financial institution can offer you new loan terms, reduce debt. This can be a reduction in monthly payments, an extension of the loan term or other conditions that meet your needs. Once an agreement is reached, you must sign a new contract that will reflect the new terms.
Special features during martial law or within 30 days after its termination, it is important to consider these rules and seek advice from financial law professionals or representatives of financial institutions to understand your rights and obligations under these conditions.
The main advantage of restructuring is that your credit history does not deteriorate. Compared to the alternative - late payments or bankruptcy, which can negatively affect your credit history, restructuring allows you to preserve your credit standing.
Restructuring can lead to a decrease in the monthly loan payment, which will reduce the financial burden on the family budget. This can be especially helpful in the event of financial hardship or a change in circumstances, such as job loss or reduced income.
A lawyer or an attorney at UM "Consultant" on issues related to reducing your debt will provide you with the necessary legal assistance and advice to find the optimal solution for your situation.
