Debt Relief

DEFINITION of 'Debt Relief'

The reorganization of debt in any shape or form, so as to provide the indebted party with a measure of relief, either fully or partially, from a huge debt burden. Debt relief can take a number of forms: reducing the outstanding principal amount (either partly or fully), lowering the interest rate on loans due, extending the term of the loan and so on.


Creditors may only be willing to consider debt relief measures when the repercussions of debt default by the indebted party or parties are perceived as being so severe that debt mitigation is a better alternative. Debt relief may be extended to any highly-indebted party, from individuals and small businesses, to large companies, municipalities and sovereign nations.

BREAKING DOWN 'Debt Relief'

The obvious drawbacks of debt relief are that it may encourage imprudent and reckless behavior by fiscally irresponsible parties, who may embark on borrowing sprees in the expectation that their creditors will eventually bail them out. In addition, creditors have to incur needless losses on debt relief measures through no fault of their own.

In a number of situations, however, debt relief may be the only alternative. For example, if a sovereign nation with a massive debt load is finding it difficult to service its borrowings, its creditors may be amenable to restructuring the debt and providing relief, rather than risk the nation defaulting on its obligations and increasing global systemic risk.

RELATED TERMS
  1. Relief Rally

    A relief rally is an increase in market prices that occurs because ...
  2. Sovereign Debt

    Bonds issued by a national government in a foreign currency, ...
  3. Enterprise Investment Scheme (EIS)

    A UK program that helps smaller, riskier companies to raise capital ...
  4. Debt Service

    The cash that is required for a particular time period to cover ...
  5. Tax Relief

    Any program or incentive that reduces the amount of tax owed ...
  6. Debt Restructuring

    A method used by companies with outstanding debt obligations ...
Related Articles
  1. Financial Advisor

    The 4 Best Debt Reduction Services

    It can be tricky to find the best debt reduction services for your financial situation. These top 4 debt consolidation firms help make the process easier.
  2. Investing

    The History of Sovereign Debt Relief

    Europe has recently been plagued by sovereign debt crises, sparking bailouts and debt relief measures.
  3. Investing

    Explaining Debt Service

    Debt service is a measure of a person or entity’s use of cash to pay interest and principal on debt obligations.
  4. Personal Finance

    Best 5 Money-Saving Tips to Get out of Debt

    Understand the different types of debt and the reasons why people get into debt. Learn about five tips to follow to get out of debt.
  5. Investing

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  6. Personal Finance

    Is It Better To Pay Off Debt Or Invest?

    There’s no clear answer to the question of what’s more important – paying off debt or investing.
  7. Retirement

    What The National Debt Means To You

    The U.S. deficit seems to grow every year. But how does it actually affect you?
  8. Retirement

    Why Retirees Are Carrying More Debt Than Ever

    It was recently discovered that as people reach retirement they are carrying more debt than ever before.
  9. Personal Finance

    How To Manage And Consolidate Your Own Debt

    With debt management services costing a lot of money, this article looks at why it is better to manage your own financial liability.
  10. Investing

    Total Debt to Total Assets

    Total Debt to total assets, also called the debt ratio, is an accounting measurement that shows how much of a company’s assets are funded by borrowing. In business, borrowing is also called leverage.
RELATED FAQS
  1. Should I file for bankruptcy or a debt relief program?

    I'm over $28,000 in debt (all current) and owed another $7,000 in medical bills. Should I file for... Read Answer >>
  2. What's the difference between debt consolidation and debt management or debt settlement?

    Learn about different ways of handling debt when you become overwhelmed, including debt consolidation, debt management and ... Read Answer >>
  3. What's the difference between debt consolidation and debt settlement?

    Learn the differences between negotiating a debt settlement with your existing creditors and applying for a new consolidation ... Read Answer >>
  4. What are some examples of a debt management plan (DMP)?

    Learn about some of the different types of debt management plans, and what you should look for when you evaluate a credit ... Read Answer >>
  5. Why would you look at a company's net debt rather than its gross debt?

    Learn the difference between net debt and gross debt, how to calculate debt using a company's financial statements and why ... Read Answer >>
  6. How long do typical debt management plans take to pay off debt?

    Find out more about how debt management plans are administered and what circumstances determine how long a management plan ... Read Answer >>
Hot Definitions
  1. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  2. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  3. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  4. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  5. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
  6. Security

    A financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship ...
Trading Center