The Key Difference Between Debt Recovery and Debt Restructuring

Debt Recovery vs Debt Restructuring
Feature	Debt Recovery	Debt Restructuring
Definition	The process of collecting overdue or defaulted debt from borrowers.	The process of renegotiating the terms of existing debt to provide relief to the borrower.
Purpose	To recover the owed money in full or partially from the debtor.	To ease the borrower’s repayment burden and avoid default or bankruptcy.
Process	Legal action, asset seizure, court proceedings, or debt collection agencies involvement.	Modification of repayment schedule, interest rate reduction, or debt write-off.
Initiator	Lender or creditor initiates recovery after default.	Usually borrower requests restructuring or lender offers it to prevent default.
Outcome	Debt recovered fully, partially, or classified as bad debt.	Improved cash flow for borrower; lender may accept reduced or delayed payments.
Impact on Credit	Negative impact; default records can harm credit rating.	May improve credit sustainability if restructuring is successful.
Time Frame	Generally shorter-term focused on immediate recovery.	Longer-term approach to allow financial restructuring.
Legal Aspect	Often involves formal legal proceedings.	Usually negotiated outside court but can involve legal approval.
Examples	Use of recovery tribunals, asset auctions, and debt collectors.	Rescheduling loan installments, interest waiver, or debt conversion to equity.