Debt Restructuring: Definition, How It Works & Types
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Debt restructuring is renegotiating the terms of an existing debt to make it more manageable for the borrower, often involving extended repayment periods or reduced interest rates.
Why is debt restructuring important?
Debt restructuring helps struggling borrowers avoid default by renegotiating debt terms, providing relief through extended repayment periods or reduced interest rates, and improving financial stability.
An easy way to understand debt restructuring is:
When a person owes a lot of money and works with their lender to change the loan terms, like extending the repayment period or lowering the interest rate.