Debt restructuring is a cheaper alternative to bankruptcy for debtors facing financial hardships. The strategy can benefit both debtors and creditors. It helps the company reduce its financial stress, elevate liquidity, and increase its financial health. Some companies restructure their debt to avoid bankruptcy. The debt restructuring process usually involves asking creditors to lower loan interest rates or prolong the company's liability payments. These strategies boost the company's chances of repaying debt and survival. After all, if the company files for bankruptcy or liquidation, the creditors will get less than what they owe. A company can restructure its debts through several debt restructuring options. One of the popular is called a debt-for-equity swap. This occurs when creditors agree to forgive some or all of the company's outstanding debts in exchange for equity. When the company has huge debts and a considerable amount of assets, filing bankruptcy or liquidation would be unfavorable for the company. So, in that case, the swap is a wise decision. If required, creditors prefer to run the distressed company as a going concern. A company may use another option to restructure its debts and negotiate with its bondholders to "take a haircut." The strategy basically involves writing off part of the interest payments or part of the debt balance. Another option is issuing callable bonds. This way, the company may avoid defaulting on interest payments. The issuer or the company can redeem callable bonds early when the interest rates are low. This way, the company can restructure existing debts into lower-interest debts. A company may also issue income bonds. These bonds offer only principal repayment and don't pay coupon or dividend payments to the bearer. Debt restructuring might provide short-term relief, but it has drawbacks. It may lower credit scores and raise borrowing costs, such as interest rates. Repeated restructuring might indicate a company's poor financial stability, which may lower Goodwill and investor interest. In addition, extended repayment tenure can also increase overall debt payment.