Debt Restructuring
in New Jersey
Any time you seek to change the way you pay money you owe to someone else, you are seeking to restructure the debt. Restructuring can include on or many changes to parts of a debt, including the due date of payments, the minimum payment, how long you have to finish paying, the interest rate, or even reducing the amount you owe.
The goal of most debt restructuring is to make it easier for you to pay back the money you owe and retake control of your financial life.
Outside of Bankruptcy
You do not always need to file bankruptcy to restructure your debt. You can restructure debt through direct negotiations with a creditor if you have fallen behind on payments. From the creditor’s perspective, restructuring a debt only makes sense if it brings in more money for them than holding you to the original terms of the loan. Most creditors have no obligation to restructure your debt, even if it seems like it would make sense.
Negotiating with creditors outside bankruptcy works best when you only have a small number of creditors and funds on hand to pay them quickly. If you try to restructure too many debts without bankruptcy protection, any single creditor can hold out. Even if you restructure several debts, a hold-out creditor still leaves you at risk of law suits, wage garnishments, or bank levies.
Restructuring through Bankruptcy
You can also restructure debt through the bankruptcy process. The bankruptcy discharge in Chapter 7 or Chapter 13 uses the court’s authority to eliminate your obligation to pay a debt. In Chapter 13, the reorganization process can also extend repayment time, reduce interest, cut principal balances (sometimes to zero), or give you time to catch up on missed payments.
Unlike debt restructuring outside of bankruptcy, restructuring inside bankruptcy can work even if you have many creditors or have no money on hand to make payments on your debt. The court-supervised process also comes with a legally enforceable automatic stay that forces creditors to participate in your bankruptcy.
Consult an Attorney
If you are considering a debt restructuring plan of any kind, consult with a qualified attorney as soon as possible. Often, you can save yourself time, money, and frustration by understanding your options and coming up with a comprehensive plan early. Meeting with a bankruptcy lawyer does not commit you to filing bankruptcy, but a good lawyer will help you evaluate your options and create a plan that works for you.