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What is Debt Restructuring?

When faced with financial strain and possible over-indebtedness, consumers should do thorough research to pinpoint the method of debt relief that best suits their specific circumstances and needs. Of the many methods of debt relief available to consumers, debt restructuring in SA is one of the savvier.

Debt restructuring is the process whereby a debt restructuring SA expert analyses the finances of a consumer in order to assess where debt problems lie, and how to free up disposable income in order to pay off debts. The aim of debt restructuring in SA is to find a way for an over-indebted consumer to pay off their debts within their limited means.

Debt restructuring involves identifying how much income a consumer has to spend on debt, while still retaining enough income to cover basic living expenses, giving the debt restructuring expert a monetary amount to work with. Using this amount, the debt restructuring expert will begin negotiating with creditors in order to create a new payment schedule that fits the new budget.

One of the key negotiation aims is to reduce the minimum amount payable by extending the repayment term. In order to so the debt restructuring expert creates a proposal that is sent to creditors; this proposal informs the creditors that the consumer has applied for debt restructuring and proposes the amount available for payment. This is done with each individual creditor.

Secondly, the negotiation will also aim to reduce the interest owed on the debt and by doing so, the amount owed is lessened and thus the consumer is put in a position where they can pay off the debts in a manageable way.

Sometimes a consumer can restructure their own debts through debt consolidation; however this option is only available to consumers who are not yet over-indebted and still qualify for more debt.

Consumers who find themselves overwhelmed by debts ought to consider debt restructuring as a means to put their debts to rest.

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