Debt Restructuring Vs. Bankruptcy: What’s the Difference?

A once thriving business can easily take a turn for the worse when their finances aren’t in order. Even when a business is drowning in debt, there can still be a light at the end of the tunnel and there are steps they can take to stay afloat. Oftentimes, the word “bankruptcy” or “debt restructuring” can invoke fear for a business owner and make them feel as if all hope is lost. However, there are significant differences between filing for bankruptcy and debt restructuring.

Filing Bankruptcy

When filing bankruptcy, business owners are looking for debt relief, but it isn’t always the best option. Bankruptcy comes with devastating and permanent consequences for both the business, personal credit, and your finance companies. The process calls for a significant amount of money spent on legal and administrative costs before any creditors are even paid––if ever. More often than not, a bank or creditor will be more willing to welcome other alternatives than go through the bankruptcy process.

Debt Restructuring as an Alternative

Debt restructuring is sometimes a better alternative than filing for bankruptcy for both the creditor and the borrow. While a business will not be completely relieved of debt as it would have been with bankruptcy, it does not face the same permanent and devastating consequences. Instead, debt restructuring is an effective way to address large amounts of debt by negotiating with creditors to change an original agreement’s terms. 

By opting for debt restructuring instead of filing bankruptcy, a business can reduce its debt burden and be more qualified for recapitalization. Debt restructuring can be a better choice in the long run compared to bankruptcy because it helps businesses maintain relationships with banks and creditors, which is imperative for any business.  

If a business chooses debt restructuring to reduce the amount of debt owed or extend debt payment terms, the business may be able to start making a profit again while still paying off its debts. Restructuring debt, and not just straight debt settlement, overall offers a clean break and will help a business avoid the long-term personal and professional consequences of filing bankruptcy.

To fully understand how debt restructuring works and if it is the right thing to do for a business, it’s essential to consult a debt restructuring expert

This article was originally published on

Published by Ferne Kornfeld

Based in Palm Beach, Florida, Ferne Kornfeld is a Principal and Commercial Finance Consultant at Value Capital Funding. Throughout her extensive career, Ferne has over 20 years of experience in the financial services industry. Even more, Ferne possesses thorough and comprehensive knowledge of corporate finance. Ferne, as well as her business partner and husband, Barry Kornfeld, believe in always doing what is best for the client. This philosophy is very hard to find in the world of finance, but they make it their mission. After working within the finance industry for years, Ferne and Barry began to realize there was a gap in the market’s offerings. Companies and businesses, most of them being small businesses, were incredibly over-leveraged but seeking solutions that often led to even more loans & debt that they were trying to alleviate in the 1st place. These small businesses’ applications were often declined due to the amount of money such companies already borrowed. Ferne and Barry soon realized that what these businesses were truly seeking was a way to restructure their debt, not accrue more. Ferne Kornfeld and her husband have decades worth of combined experience, which gave them the thorough background they needed to begin speaking to investors and lenders, creating a niche and revolutionary approach to financing and funding for businesses. With such an incredible niche specialty, and when attending association meetings, they found that no one else offers what they do. Unlike their competitors, Ferne and Barry don’t aim to only lend money. They have gravitated away from pure lending and work almost exclusively to restructure loans so that their clients can manage their debt without taking on more debt.

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