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5 Questions To Ask Before Agreeing To Debt Restructuring Terms

By Spodek Law Group | February 20, 2024

5 Questions To Ask Before Agreeing To Debt Restructuring Terms

1. What is the full scope of debt being restructured?

It’s important to have clarity on the specific debts being restructured – credit cards, personal loans, auto loans etc. Ask for a detailed breakdown so you understand how the restructuring will impact your overall finances.

2. What are the exact new repayment terms?

Ask for specifics on the new repayment plan including interest rates, monthly payments, total repayment period and any balloon payments. Make sure you can realistically meet the new obligations.

3. Will my credit score be impacted?

Most debt restructuring involves settling debts for less than owed or changing repayment terms, both of which can negatively impact your credit. Understand the implications so you can plan ahead.

4. Are there any fees or penalties for restructuring?

Restructuring often involves fees from credit counseling agencies or lenders. Make sure to clarify upfront what fees apply so you don’t end up paying more without realizing it.

5. What happens if I can’t meet the new repayment terms?

Understand what the consequences are if you struggle with new payments such as: redefaulting, debt lawsuits, garnished wages, etc. Have a backup plan in case you can’t keep up.

Debt restructuring can provide relief, but make sure you review all details carefully first. Consulting an attorney or financial advisor can also help protect your interests. Don’t rush into agreements without fully understanding the pros and cons.

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