Debt restructuring involves changing the terms of debt repayment between a debtor and a creditor. It allows the debt to be repaid without serious financial consequences. In practice, this involves:
- extending the loan term;
- reducing the monthly repayment;
- waiver of part of the penalties;
- change to the repayment schedule;
- temporary deferral of payments;
- conversion of a foreign currency loan.
Debt restructuring allows you to avoid court proceedings, account seizures and enforced recovery. But it is important not to delay.
Loan restructuring and disputes with banks
Most often, loan restructuring is required following:
- job loss;
- a drop in income;
- illness;
- business closure;
- military action;
- accumulation of fines and penalties.
The bank detects the arrears and initiates debt recovery proceedings. Initially, demands and phone calls are made. This may be followed by court proceedings or enforcement proceedings. In such a situation, legal assistance for debtors enables them to:
- assess the actual amount of the debt;
- check the legality of fines;
- negotiate with the bank;
- prepare documents;
- challenge unlawful charges.
In many cases, it is precisely a well-prepared case that enables new repayment terms to be agreed.
How does debt restructuring with a bank work?
The procedure usually consists of several stages:
- analysis of the contract and the debt;
- verification of penalties and interest;
- preparation of a statement to the creditor;
- negotiations regarding new terms;
- signing of a supplementary agreement.
If there are already disputes with banks or a court case, a lawyer prepares a separate legal position and supports the negotiations.
Restructuring of tax debt
There are several options.
Restructuring of tax debt for businesses
Tax debt usually arises due to:
- cash flow gaps;
- business suspension;
- financial difficulties of the enterprise.
Restructuring a legal entity’s tax debt allows:
- to avoid account freezes;
- to reduce the risk of tax enforcement;
- obtain a phased payment schedule;
- stabilise the company’s operations.
To do this, you need to:
- prepare financial documents;
- justify the inability to make a one-off payment;
- submit an application to the tax authority;
- agree a payment schedule.
Restructuring of tax debts for individuals
Individuals also apply to change the payment arrangements for their tax debts. Most often, this concerns:
- sole traders;
- debts relating to the single tax;
- penalties;
- additional tax assessments.
In such cases, it is important to complete the documents correctly. After all, errors in the application are grounds for refusal.
Restructuring of a company’s accounts receivable
Sometimes the problem arises not because of loans, but rather because of debts owed to the company by its counterparties. The company does not receive payment for goods or services. This leads to problems with taxes, wages and liabilities. Restructuring a company’s accounts receivable helps to:
- agree a new payment schedule;
- secure repayment guarantees;
- avoid lengthy legal disputes;
- maintain business relationships.
A debt lawyer in such situations:
- conducts negotiations;
- drafts agreements;
- assesses risks;
- monitors compliance with agreements.
Restructuring of housing and communal services (HCS) debt
Debts for utility services usually accumulate gradually. A person misses a few payments, then penalties and legal costs are added. Restructuring housing and utility debts allows you to:
- split the debt into instalments;
- avoid enforcement proceedings;
- reduce the financial burden;
- stabilise the situation without going to court.
The following are usually required for the application:
- passport;
- Tax Identification Number (TIN);
- property documents;
- proof of income;
- information about the debt.
Legal assistance for debtors from Svarog
Many people only turn to a lawyer after their accounts have been frozen or enforcement proceedings have been initiated. However, there are significantly more options available at an early stage. A debt lawyer can help:
- negotiate without pressure;
- reduce penalties;
- avoid errors in documents;
- protect assets;
- prepare a legal defence.
In complex cases, a solicitor checks the legality of the actions of the bank, debt collectors or government bodies. Svarog’s lawyers handle various cases related to debts, loans and financial disputes. Each situation is analysed individually. No cookie-cutter solutions. Our advantages:
- analysis of documents and risks;
- negotiations with creditors;
- handling disputes with banks;
- assistance to individuals and businesses;
- drafting of applications, complaints and agreements;
- handling of court proceedings.
If debt has become a problem, do not wait for court proceedings or seizure of assets. The sooner you start working on it, the more options you will have to resolve the situation.
Questions and answers
How can I restructure my debt?
Analyse the debt, prepare the documents and approach the creditor with a proposal to change the repayment terms. It is best to engage a solicitor for this.
Is it possible to agree on debt restructuring with the creditor?
Yes. Creditors agree to negotiations, provided they see a realistic possibility of the debt being repaid in instalments.
What documents are required for debt restructuring?
The following are usually required:
- passport;
- tax identification number (TIN);
- loan agreement;
- proof of income;
- financial statements;
- information about the debt.
Does restructuring help to stop court proceedings or enforcement proceedings?
In many cases, yes. If the parties reach an agreement, the creditor may withdraw the claim or suspend enforcement proceedings.
How do I restructure a loan or debt with a bank?
You need to submit an application to the bank, explain your financial difficulties and agree on a new repayment schedule. It is advisable to have the terms reviewed by a lawyer before signing the documents.
How much does legal assistance with debt restructuring cost?
The cost depends on the type of debt, the complexity of the case, the number of creditors and whether there is a legal dispute. The exact price is determined after analysing the documents.