Modern law and debt restructuring

The principal focus of modern insolvency legislation and business debt restructuring practices no longer rests on the elimination of insolvent entities, but on the remodeling of the financial and organizational structure of debtors experiencing financial distress so as to permit the rehabilitation and continuation of the business.
For private households, it is argued to be insufficient to merely dismiss debts after a certain period^{[citation needed]}. It is important to assess the underlying problems and to minimize the risk of financial distress to re-occur. It has been stressed that debt advice, a supervised rehabilitation period, financial education and social help to find sources of income and to improve the management of household expenditures need to be equally provided during this period of rehabilitation (Refiner et al., 2003; Gerhardt, 2009; Frade, 2010). In most EU Member States, debt discharge is conditioned by a partial payment obligation and by a number of requirements concerning the debtor's behavior. In the United States (US), discharge is conditioned to a lesser extent. The spectrum is broad in the EU, with the UK coming closest to the US system (Reifner et al., 2003; Gerhardt, 2009; Frade, 2010). The Other Member States do not provide the option of a debt discharge. Spain, for example, passed a bankruptcy law (ley concurs) in 2003 which provides for debt settlement plans that can result in a reduction of the debt (maximally half of the amount) or an extension of the payment period of maximally five years (Gerhardt, 2009), but it does not foresee debt discharge.^[9]
It is almost impossible to discharge student loan debt by filing bankruptcy.^[10] Unlike most other debtors, the individual with student debt must give a series of reasons and tests (with steps) to prove that the debtor could not pay the debt. If the person were to file bankruptcy, he or she is normally encouraged to do so under Chapter 13.
In order to avoid bankruptcy, one could negotiate with the lender to lower monthly payments, or one could seek student debt consolidation. Student loan bankruptcy is considered a last resort. However, some borrowers find themselves being forced to file bankruptcy, as the lender refused to lower payments, or to lower/freeze interest rates (which grows the debt).