What does troubled debt restructuring involve?

Troubled debt restructuring involves modifying the loan terms to assist borrowers facing financial difficulties. This can include changing the interest rate, extending the payment period, or altering payment amounts to make it more manageable for the borrower to meet their obligations. The primary goal is to avoid defaults and foreclosure situations, allowing the borrower a better chance to recover financially.

The restructuring process is important for both lenders and borrowers. For lenders, it helps maintain the loan's value and potentially recover the outstanding amounts over time. For borrowers, it provides relief by adjusting the terms to reflect their current financial circumstances, thus increasing their chances of fulfilling the loan agreement without exacerbating their financial strain.