Loan Restructuring - a Negotiation Where the Bank Needs Figures, Not a Plea
When payments falter most borrowers choose between two extremes: contact the bank and "ask for relief", or avoid contact until the notices start. Both are wrong. Restructuring is not the bank's obligation, but it is often the bank's most profitable scenario - enforcement, auction and collection of the residual debt are expensive, slow and a bad asset. So restructuring is a negotiation, and it is won by the side with the figures: what the borrower can actually pay, what the alternative costs the bank, and where the debt contains unlawful charges.
This page sets out the real instruments of restructuring and what each costs: a changed schedule and a grace period, an extended term, writing off penalties, refinancing and consolidation; how a proposal to the bank is prepared, what the lawyer checks in a restructuring agreement (limitation, new security, guarantors) and what happens when there are several creditors or the debt has already passed to a collector. Mortgage enforcement and penalty cap disputes have their own pages.
Five Instruments and What Each Costs
Restructuring is not "relief" - every instrument has a price, and some of them cost more in the long run than the problem itself.
A Restructuring Negotiation - the Stages
Auditing the debt
A full picture of every creditor: principal, interest, penalties and fees separately, from the statements. The lawyer checks the penalties against the caps (0.27% per day, 1.5 times the outstanding principal in total) and the effective rate against the 50% limit - where there is an excess, the negotiation opens with a demand rather than a request.
Calculating what can genuinely be paid
Income, essential expenses, the family situation and the sum that can realistically be paid each month - not the sum that could "just about" be managed. For a bank, a proposal that breaks down again in three months is worse than no proposal, because it destroys trust.
Showing the bank the price of the alternative
The enforcement price (auction price minus costs), the timeline, the prospect of collecting the residual debt given the borrower's real assets. For the bank this is not a threat but a calculation - and it is what makes the proposal acceptable.
Framing and sending the proposal
A written proposal with concrete figures: what sum, on what schedule, over what period, with what security; a demand to write off penalties with the recalculation attached; the alternative if the bank declines. The bank must answer a customer's written approach within the period set by regulation.
Checking the text of the agreement
This is where the risk is greatest: a restructuring agreement often confirms the amount of the debt with your own signature (unlawful penalties included), restarts the limitation period, adds new security or a guarantor and contains no waiver of earlier claims. The lawyer corrects the text on exactly those four points.
Monitoring performance
Keeping to the new schedule, documenting the payments, updating the credit history record, checking that penalties have stopped accruing. The lawyer monitors the first three months of payments - that period shows whether the capacity to pay was calculated correctly.
The Restructuring Agreement - Four Clauses to Change Before Signing
First - acknowledgement of the amount. The text usually fixes a total sum that the borrower has "acknowledged", and that sum often contains unlawful penalties. After signature, disputing it becomes far harder: the bank produces your own signature. So the lawyer first demands a recalculation and puts the corrected figure into the agreement.
Second - the revived limitation period. Acknowledging a debt, or even a partial payment, restarts the limitation period. This matters most for old loans and debts passed to collectors: a debt that was practically unenforceable through limitation is revived by a single signature. The lawyer always checks limitation before any talk of restructuring - sometimes the right decision is not to sign at all.
Third and fourth - new security and a new guarantor. In exchange for consolidation or "favourable" terms the bank often asks for a mortgage over the flat to cover debts that were unsecured, or for a family member's guarantee. That changes the risk structure: an online loan whose worst outcome was a court judgment and a deduction from wages becomes a risk of losing the flat, and the guarantor becomes a new debtor. The lawyer works hardest on these two clauses: either removal altogether or limits on amount and duration.
What a Restructuring Negotiation Rests On
- Penalty caps
- Fines and contractual penalties together may not exceed 0.27% of the obligation per day or 1.5 times the outstanding principal; anything above is void. In a restructuring negotiation this is what turns "asking for relief" into a lawful demand.
- Effective rate cap
- The annual effective interest rate (interest and all fees together) may not exceed the statutory limit of 50%; the excess is void and what has been paid is credited to the principal.
- Early repayment fee
- Repaying a loan early is the borrower's right and the fee is capped by regulation - which is what makes refinancing possible. A high "penalty for early repayment" written into the contract is reduced to the cap.
- Responsible lending
- A bank must grant a loan in proportion to the borrower's income; a loan issued in breach of the limits raises the question of the bank's own responsibility in a dispute and strengthens the borrower's position in negotiation.
- Deadline for a complaint to the bank
- A bank must register a customer's written complaint and reply in writing within the period set by regulation; the reply is the first document of the dispute and a precondition for a complaint to the National Bank.
- Limitation and acknowledgement
- A written acknowledgement of a debt or a partial payment restarts the limitation period; on old debts this is decisive and is checked separately before any restructuring is signed.
What the Proposal Sent to the Bank Must Contain
- A recalculation of the debt: principal, lawful interest and penalties within the cap - with a demand to write off the rest.
- Income documents and the real monthly payment the borrower can sustain (not the maximum).
- The proposed schedule with concrete dates and a term, ideally with the first payment made alongside the proposal - as a sign of good faith.
- A calculation of the alternative for the bank: the likely auction price, enforcement costs, the timeline and the realistic prospect of collecting the residual debt.
- The question of guarantors and security: what you agree to and what you do not; a version without new security must be set out separately.
- A demand that the agreement close all earlier claims and that the credit history record be updated once it is performed.
Three Restructuring Cases
Four creditors and one schedule
A family had a mortgage, two online loans and a credit card; the monthly payments exceeded their income. The lawyer: an audit of all four debts (the penalties on the online loans exceeded the cap and were cut by 40%), a calculation of real capacity to pay, and a separate proposal to each creditor with a proportionate allocation. Three creditors agreed; the fourth sued, and the court confirmed the penalty recalculation.
A consolidation that put the flat at risk
A bank offered to merge three unsecured loans into one "cheaper" loan secured by a mortgage over the client's flat. The lawyer: the combined rate really was lower, but the risk changed - the flat would become security. The alternative: restructuring two of the loans at the same bank without security and repaying the third. The client reduced the monthly burden without encumbering the flat.
A collector's "favourable" offer on an old debt
A collection company offered the holder of a seven-year-old debt a "50% write-off" in exchange for signing a new schedule. The lawyer: limitation had already expired and signing would revive the debt; besides, the "written-off" part turned out to be unlawful penalties anyway. Nothing was signed, and when the company later sued, limitation disposed of the claim.
Questions About Restructuring
I asked the bank for restructuring and was refused. What else can I do?
An oral request and a written, calculated proposal are two different things. The lawyer recalculates the debt (the penalties often exceed the cap), works out your real capacity to pay and sends the bank a written proposal together with the price of the alternative. The bank must reply in writing within the set period, and that reply is the basis for the next step - a complaint to the National Bank or a court claim.
Will restructuring damage my credit history?
Restructuring is recorded in the credit history, but its alternative - arrears, default, enforcement - is recorded far worse and stays for years. The practical logic: the earlier restructuring happens (before the arrears become long), the less the damage. The lawyer also asks for a clause on updating the record once the agreement has been performed.
My debt has been passed to a collector. Can I restructure with them?
You can, and often more flexibly - the collector bought the debt at a discount and even partial payment is a profit. But two things are checked first: limitation (signing revives the debt) and the lawfulness of the amount (penalty caps). An agreement with a collector is made in writing, with a clause closing all claims on full payment and an obligation to update the credit history.
My debts exceed my income and I see no way out. Is there personal bankruptcy?
Georgia has a statutory personal insolvency regime involving unified proceedings with creditors, realisation of assets and settlement of obligations; the conditions and consequences are checked individually against the current version of the law. It is a last resort: it does not wipe out debt unconditionally but at the expense of assets and income, and it leaves a long-term mark on the credit history. The lawyer considers it after every restructuring option has been exhausted.
I have decided simply to stop paying - they cannot take anything from me anyway, can they?
That is the most expensive strategy: penalties accrue (up to the cap), the case goes to court or a notary, the Enforcement Bureau freezes accounts, the statutory portion is deducted from wages, property is inventoried and, with a mortgage, the flat goes to auction. On top of that the credit history is blocked for years. If payment is impossible, seeing a lawyer in the first month is far cheaper than in the third year.
Lawyers for Loan Restructuring
Banks agree to restructuring far more often when the proposal is calculated and the debt recalculated. Within 15 minutes the coordinator connects you with a lawyer who negotiates with banks and collectors on a regular basis.
No published lawyers in this category yet
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