Debt Restructuring Law and Legal Definition

Debt restructuring allows a private or public company or a sovereign entity facing financial problems to reduce, reschedule and renegotiate its debts in order to improve or restore liquidity and continue its operations. Out-of court restructurings are known as workouts. They are increasingly becoming globally applicable and are a preferable alternative to bankruptcy. Debt restructuring is typically a method used to alter the terms of debt in order to gain some financial advantage. Often the debt is restructured to include unpaid interest, penalties and other fees.