This last year has been a tough one, and if you find yourself drowning in debt and don’t know what to do, debt restructuring may be the solution. Debt restructuring is the term for when a creditor changes the terms of a loan agreement, which can make your debt more manageable and keep you from defaulting on loans. The company you hire will attempt to negotiate with your creditors to convince them to eliminate some of your outstanding debt before you take out a new loan. There are 3 reasons why this may be a great option.
- Lower Monthly Payments. If you have found yourself choosing which bills to pay and having to let some of them lapse, debt restructuring could help you lower your monthly payments so you can make all of your payments on time. If your debt is due to something like an emergency medical procedure, you may be able to negotiate a lesser amount owed.
- Prevents Filing for Bankruptcy. Creditors are likely to agree to some debt forgiveness if you are on the brink of filing for bankruptcy because they would rather recover at least some portion of what is owed to them, rather than risk getting nothing in a bankruptcy. Filing for bankruptcy also hurts your credit score by as much as 150 points or more and stays on your credit report for up to 10 years.
- Lower Interest Rate. If you have consistently paid your bills on time every month, it may be possible for your lender to lower your interest rate, allowing you to pay more on the principal each month. It will depend on the type of loan, however. The interest rate on federal student loans is set by Congress and cannot be negotiated.
If you think you could benefit from debt restructuring and would like more information, please give us a call at Bennett Guthrie PLLC today!