to rebuild their finances. For a business, a restructuring agreed with the creditors is a common approach but this requires the agreement of all creditors. Debt restructuring Debt restructuring is a process that allows a private or public company - or a sovereign entity - facing cash flow problems and financial distress, to reduce and renegotiate its delinquent debts in order to improve or restore liquidity and rehabilitate so that it can continue its operations. Out-of court restructurings, also known as workouts, are increasingly becoming a global reality. A debt restructuring is usually less expensive and a preferable alternative to bankruptcy. The main costs associated with a business debt restructuring are the time and effort to negotiate with bankers, creditors, vendors and tax authorities. Debt restructurings typically involve a reduction of debt and an extension of payment terms. Debt consolidation Debt is a problem if the interest payments are greater than the debtor can afford. Debt consolidation typically involves borrowing from one lender (typically a bank), at a low rate of interest, sufficient funds to repay a number of higher interest rate debts (such as credit cards). By consolidating debts, the debtor replaces many payments to many different creditors with one monthly payment to one creditor, thereby simplifying their monthly budget. In addition, the lower interest rate means that more of the debtor's monthly payment is applied against the principal of the loan, resulting in faster debt repayment. It may be necessary to have a co-signor or other security, such as a car, if the borrower's credit is not sufficient on their own. Formal proposal to creditors If the debtor cannot deal with their debt problems through personal budgeting, negotiation with creditors, or debt consolidation, the final bankruptcy alternative is a formal proposal or deal with the creditors. Different countries have different legal procedures for compromising debts. In the United States, a debtor can file a Chapter 13 Wage Earner Plan. The plan will typically last for up to five years, during which time the debtor makes payments that are distributed to their creditors. In Canada, a Consumer Proposal can be filed with the assistance of a government-licensed proposal administrator. Forty-five days after filing the proposal the creditors vote on the proposal, which is considered accepted if more than half of the creditors, by dollar value, vote to approve it. Individual Voluntary Arrangement In the UK the individual voluntary arrangement