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Church Improvement

How Does a Church do Debt Restructuring?

church debt restructuring

Churches are a place of worship and internal, spiritual improvement. But, in times like these, even churches have to focus on the material and try to run like a business. But it is hard for businesses these days, even if they are churches. Some of them have to go into debt just to say afloat and offer their congregation a place of worship. In this article, we will go through all the reasons why a church should go through debt restructuring.

1 The Definition of Debt Restructuring

2 How to Restructure the Debt of Your Church

3 Filling for Bankruptcy instead

1 The Definition of Debt Restructuring

The process of restructuring debt is a process where a party that is under financial problems refinances its current debt in a way that will hopefully give it time and flexibility to take care of the initial debt. The biggest reason why a church should restructure debt is that it can manage its financial load more easily in the future. The new, restructured debt should give the church more options going forwards, as well as a much better opportunity to become debt-free in the future.

church debt restructuring

2 How to Restructure the Debt of Your Church

Luckily for your church, there are quite a few ways you can do debt restructuring.

1 Find a way to Increase the Maturity Date – Every loan has a set period upon which every single dollar of your debt needs to be a pain. But, in some cases, banks will be open to negotiation about the maturity date of your loan. Use this opportunity, if it appears for you, to restructure your debt and give your church more time to heal financially.

2 Creating a Building Fund – You can create a building fund for your church by transferring some funds that you have in your church budget to this newly formed building fund. This is probably one of the best and most stable ways to restructure a church debt. It will also give the church a great strategy to finalize all its obligations to its debtors.

3 The help of a Third Party– If you can reach out to your creditors and inform them that you wish the restructure your debt with the help of a third party, they will most likely be very happy to comply. This could also mean that you could get a certain amount of your debt written off.

debt restructuring for churches

3 Filling for Bankruptcy instead

Sometimes, when you are out of options and can not pay your loan on time, you will be forced to declare bankruptcy. But, bankruptcy is not the end of all things, it is not some financial end of the world. What bankruptcy really means is that you, the church, your creditors and the court will need to get together and figure out a legal way for the church to repay its debt. In most cases, the church will have to offer something that is of similar value to the debt that needs repaying. If that is not possible, the church has to go into liquidation.