Debt restructuring

What is happening

Someone has lost their job or fallen ill; payments are still being made, but only just, and in a month or two the arrears will begin. They want to approach the bank early but do not know what to ask for or what the bank can actually offer.

There are several loans: a mortgage, a personal loan and a couple of credit cards. Each bank calls separately, the total repayment exceeds income, and arrears on one are already bringing penalties on the others.

There is already a judgment, the bailiffs are taking half the salary, and there is not enough left to live on. The person is willing to pay, but at a level the family budget can actually bear.

What the law says

• A bank may change the term or instalments or grant a deferral by agreement with the borrower; as a rule it has no duty to agree to restructuring, so what you bring to it and how matters.
• The Federal Law No. 353-FZ of 21 December 2013 "On Consumer Credit (Loans)" (the Consumer Credit Law) provides for payment holidays for borrowers in difficulty, such as a significant fall in income or temporary incapacity: payments are suspended or reduced for up to six months, provided the loan amount meets the conditions.
• If the debt has been awarded by a court, the debtor may ask the court to defer enforcement or allow payment by instalments (Code of Civil Procedure), showing their financial position and a realistic repayment plan.
• In enforcement proceedings, deductions from income generally do not exceed 50 per cent, and at the debtor's request the bailiff leaves income equal to the subsistence minimum (Federal Law No. 229-FZ of 2 October 2007 "On Enforcement Proceedings").
• In a personal bankruptcy case under Federal Law No. 127-FZ of 26 October 2002 "On Insolvency (Bankruptcy)" (the Insolvency Law), the court may approve a debt restructuring plan for up to three years if the debtor has sufficient income; if it cannot be carried out, the sale of assets follows.
• Arrangements with creditors can also be reached with a mediator under Federal Law No. 193-FZ of 27 July 2010 "On the Alternative Dispute Resolution Procedure with the Participation of a Mediator (Mediation Procedure)" and, in court, recorded in a settlement agreement.

What we do

• We build a complete picture of the debts: creditors, balances, rates, arrears, security, court cases and enforcement proceedings.
• We set the debts against the family's income and outgoings and work out what payment is realistic and for how long.
• We check whether you qualify for a loan or mortgage payment holiday and prepare the request to the bank with supporting documents.
• We prepare reasoned restructuring requests and negotiate with banks and creditors.
• Where the debt has already been awarded, we apply to the court for deferral or instalments and ask the bailiff to protect the subsistence minimum.
• We tell you plainly when restructuring is not possible and bankruptcy is the more sensible option to discuss, and explain the consequences of each route.

What we will need from you

• Loan agreements, repayment schedules and statements of the outstanding balance.
• Proof of income: salary statements, bank statements, details of benefits and pensions.
• Evidence of hardship: dismissal papers, sick notes, disability certificates or changes in the household.
• Details of any court cases and enforcement proceedings already under way.
• A list of the family's assets and essential outgoings.