Debt Rescheduling

Don't pay your credit card bill by the due date and you're doing a little light, unilateral debt rescheduling. This method typically won't work for businesses. Skip a large enough payment and the lender might just declare you in default. So for corporate entities, there's a more formal process.

Debt rescheduling comprises a way of reorganizing a company's outstanding obligations, giving the firm more time to make its payments. It is usually part of a general restructuring effort (See: Debt Restructuring), meant to help a troubled company deal with a heavy debt load (See: Debt Load). And in the real world, this is how companies (don't) go bankrupt. Banks originally loaned $2 billion at 7 percent interest payable in 20 years.

The company did fine for 7 then fell on hard times. Hi Clear Channel. We're lookin' at you. So the $2 billion was paid down to $1.5 billion and then the company could pay no more. So the bank redoes the loan as another $2 billion loan at 2 percent interest for the first 3 years, then 10% interest thereafter. And the company accepts because their alternative is...well...

See: Bankruptcy for details.