A restructuring lowers the instalment. It does not reduce the debt, and on most lenders' standard forms it adds to it. The concessions on offer each have a price, and the clauses that carry that price sit in the agreement rather than in the offer letter.
A borrower who cannot meet the instalments has a narrow set of options, and restructuring is usually the best of them. It is also the one most often signed without advice, because the offer arrives as a relief and the paperwork looks like a continuation of what is already in place. It is not. A restructuring agreement is a new contract that varies or replaces the old one, and the terms on which it does so are negotiable at the point of signature and almost never afterwards.
What a restructuring changes, and what it does not
Restructuring alters the mechanics of repayment: how long the borrower has, how much is paid and how often, and sometimes at what rate. It takes effect as a contract under the Contract Law, Cap. 149, and binds the parties to what the document says.
What it does not do, unless it says so expressly, is reduce the amount owed. Lower instalments over a longer period will usually mean more total interest, not less debt. That is a legitimate trade for a borrower whose problem is cash flow rather than solvency, but it should be a trade made knowingly.
Before anything is negotiated, establish who holds the loan. The counterparty on a restructuring is not always the institution that granted the facility, and the identity of the current holder affects who has authority to agree what.
The levers, and the price of each
Extending the term
The most common concession and the simplest. The instalment falls because the same principal is spread over more payments. The cost is the additional interest across the longer period, and the ability to extend at all may be limited where the term already runs a long way ahead.
A grace period or a suspension of instalments
Temporary relief, either from capital or from capital and interest together. Ask what happens to interest during the period. If it continues to accrue and is added to the balance, the pause has increased the debt, and the instalment resuming afterwards may be higher than the one that could not be paid.
Capitalising the arrears
Arrears are rolled into the principal and the account is brought back to performing status. This is useful and it is not free: the capitalised sum then bears interest for the remainder of the term.
A lump sum against the principal
Where the borrower can raise a payment, from the sale of an asset or from expected receipts, applying it to the principal reduces both the balance and the instalment that follows. Confirm in writing that the payment is applied to principal rather than to arrears, fees or accrued interest, because the two produce very different outcomes.
Adding a co-borrower or a guarantor
Lenders frequently ask for an additional party, sometimes as the condition of a longer term. This is not an administrative step. It creates a direct liability for the person added, usually for the whole of the debt, and it exposes whatever assets that person has. Anyone being asked to join a facility in this way needs separate advice, not the borrower's.
Sustainability is the test that is actually applied
A lender assesses whether the proposed arrangement can be met from income remaining after essential living costs and existing commitments. A plan that only works if nothing goes wrong will fail, and a failed restructuring leaves the borrower worse placed than before, because the concession has been used and the arrears have grown.
The corollary is that the figures presented should be the real ones. Understating expenditure to secure approval produces an agreement that cannot be performed.
The clauses that carry the cost
The offer letter describes the instalment. The agreement contains the terms, and these are the ones to read before signing:
- Security. Whether existing mortgages and charges continue, and whether new or additional security is required over assets not previously charged.
- Guarantees. Whether existing guarantors are released, continue, or are being asked to confirm liability afresh for a larger or longer obligation.
- Acknowledgement of the balance. Most restructuring agreements state the sum owed and record the borrower's acceptance of it. If the balance, the interest calculation or the charges applied are disputed, that dispute has to be raised before signature. Where any part of the debt may be affected by the Limitation of Actions Law 66(I)/2012, take advice before signing anything that acknowledges it.
- Releases and waivers. Some forms include a release of claims against the lender. That is a substantive concession and should be recognised as one.
- Default terms. What counts as a default under the new arrangement, what notice is given, and what the lender may do on default. A single missed payment triggering the whole balance is common and is negotiable.
- Costs and fees. Arrangement fees, legal costs and valuation costs are frequently added to the balance rather than invoiced, which means they are borrowed and carry interest.
Where the home sits in this
Where the loan is secured on the borrower's home, that property is the asset at risk, and it is normally the reason the restructuring is being pursued at all. Any protection available depends on the terms of the security, on what the restructuring agreement itself provides, and on the borrower's actual capacity to perform it. Nothing about a restructuring agreement protects a residence on its own; the performance of the agreement does.
Timing
The range of options is widest while the account is still being serviced, however imperfectly, and narrows once enforcement has begun. The concessions described above are commercial decisions by the lender, and a lender's willingness to make them is at its highest before the file moves to recovery.
What to send us
The original facility agreement and any previous variations, the security documents and any guarantees, the recent statements, the arrears position, and any restructuring offer or term sheet received. If the loan has been transferred, send the notice of transfer.
That notice is not a courtesy either, and the statute around it gives a borrower rights that are rarely used. Under section 19(2) of the Sale of Credit Facilities and Related Matters Law of 2015, Law 169(I)/2015, the assignor and the purchaser must inform the borrower, the guarantors and the security providers in writing by registered letter, within fifteen working days of the transfer, that the facility and its securities have moved, and the purchaser must give the contact details of the people now handling them and the new account numbers. Under section 19(3) the two of them must also notify the Registrar of Companies, the Land Registry and every other authority holding a register in which the transferred security is recorded, on the day of the transfer or at the latest the next working day.
The right worth knowing about comes earlier, before the sale. Under section 18(1) a credit institution selling its whole portfolio must publish its intention in the Official Gazette and in three daily newspapers, and the borrowers, their guarantors and their security providers may within forty-five days of that publication submit an offer to buy the facility themselves. Where only part of the portfolio is being sold, the publication is a general one carrying no details, and the lender must write to the borrower, the guarantors and the security providers inviting an offer within forty-five days of the date the letter was sent. The offer may be made only once. A borrower who reads the letter as an administrative formality can let a right to bid for their own debt expire.
Section 12B then governs how a credit acquiring company or a servicer must behave once the loan is theirs: they must act in good faith, fairly and professionally, give information that is not misleading, unclear or false, respect and protect the borrower's personal data and privacy, and communicate in a way that does not amount to harassment, coercion or undue influence. Those are statutory duties, and conduct that breaches them is a matter to raise rather than to endure. A restructuring agreement can be reviewed quickly, and it is the last point at which its terms can be changed.
Lending and security work sits within our corporate and commercial practice, and enforcement disputes within our litigation and arbitration practice. Where the borrower is an individual rather than a company, the statutory routes are set out on Personal Insolvency in Cyprus. Where the borrower is a company, Directors' Duties When a Cyprus Company Is Insolvent sets out what changes for the board. If a secured property is heading for sale, see Buying Property at Auction in Cyprus. If the facility is sold rather than restructured, the borrower has forty five days to bid for it: see your bank sold your loan.
Discuss your own situation with us
Questions we are asked
Is it simply a continuation of the old facility?
No. It is a new contract that varies or replaces the old one, and its terms are negotiable at the moment of signature and almost never afterwards.
What should I ask for before signing?
The full agreement rather than the offer letter alone, an itemised calculation of the balance, a comparison of the security before and after, and an express answer on what you are giving up.
Does restructuring reduce the amount I owe?
Not unless the agreement says so expressly. A restructuring alters the mechanics of repayment, how long the borrower has, how much is paid and how often, and sometimes at what rate, and takes effect as a contract under the Contract Law, Cap. 149. Lower instalments over a longer period will usually mean more total interest rather than less debt. That is a legitimate trade for a borrower whose problem is cash flow rather than solvency, but it should be a trade made knowingly.
What does a payment holiday actually cost?
It depends on what happens to interest during it, which is the question to ask before accepting one. Where interest continues to accrue and is added to the balance, the pause has increased the debt, and the instalment resuming afterwards may be higher than the one that could not be paid in the first place. The same logic applies to capitalising arrears: rolling them into the principal restores the account to performing status and is useful, but the capitalised sum then bears interest for the remainder of the term.
The bank wants my relative added as a co-borrower or guarantor. Is that a formality?
No. It creates a direct liability for the person added, usually for the whole of the debt, and it exposes whatever assets that person has. Lenders frequently ask for an additional party, sometimes as the condition of a longer term, and anyone asked to join a facility in this way needs separate advice of their own rather than the borrower's.
If I can make a lump sum payment, what should I watch?
Confirm in writing that the payment is applied to principal rather than to arrears, fees or accrued interest, because the two produce very different outcomes. Applied to the principal, it reduces both the balance and the instalment that follows.
What test does the lender actually apply?
Sustainability: whether the proposed arrangement can be met from income remaining after essential living costs and existing commitments. A plan that works only if nothing goes wrong will fail, and a failed restructuring leaves the borrower worse placed than before, because the concession has been used and the arrears have grown. The corollary is that the figures presented should be the real ones, since understating expenditure to secure approval produces an agreement that cannot be performed.
What should be read before signing?
The agreement rather than the offer letter, because the offer letter describes the instalment and the agreement contains the terms. Check whether existing mortgages and charges continue and whether new or additional security is required over assets not previously charged, and whether existing guarantors are released, continue, or are being asked to confirm liability afresh for a larger or longer obligation. Establish first who actually holds the loan, because the counterparty on a restructuring is not always the institution that granted the facility, and the identity of the current holder affects who has authority to agree what.
Related Reading
This article is for general information only and does not constitute legal advice. Laws and their application can change, and individual circumstances differ. For advice on your own matter, contact Klitos Platis at klitos@kleanthousplatis.com or telephone +357 22 680 330.
Klitos Platis
Advocate, Partner
Kleanthous & Platis LLC, Nicosia · Revised 4 August 2026
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