Debt Relief? | Best Finance Tools

Debt relief?occurs when human beings, companies or countries are given the partial or total forgiveness of debt in order to slow and stop the pace at which their liability augments. Originally,?debt relief?was used in the contexts of agriculture and slavery, but its use will later be broadened to international contexts such as when a nation begins to accumulate a massive amount of financial obligations to be repaid. Recent events in the world of finance have led to credit bubbles and housing bubbles forcing millions of people to seek debt relief.

There are two main groups concerned with debt relief: human beings and nations. When a country becomes unable to solve its debt issues, it asks its creditors for international debt relief. In the past, there have been examples of nations engaged in international debt relief but perhaps the first one is the Germany?s. Indeed after the two world wars, Germany was forced to pay all the damages that it had caused to the countries dragged into war such as the United States, France or England. At that time, this was seen as the only way that the Germans could fix what the Nazis had done and to bring both reconciliation and peace in the European continent.

Another illustration, and probably the most common one, is the debt of less developed countries. This subject was introduced in the 1990s by a coalition composed of non-governmental organizations, Christian organizations, and many other groups gathered under the appellation Jubilee 2000. The main objective of Jubilee 2000 was to convince the countries forming the Group of 8 to prioritize debt relief onto the agenda of western governments and international organizations such as the International Monetary Fund and the World Bank. In 1996 the International Monetary Fund and the World Bank decided to initiate the Heavily Indebted Poor Countries or HIPC in an attempt to help poor nations fight debt and reduce poverty. To date, there are 39 nations, of which 36 are located on the African continent, under the HIPC. Debt relief can also be sought by human beings.

Personal debt relief was first mentioned in ancient societies. Indeed, a look at the Book of Leviticus shows how God gave Moses specific indications on how to forgive debts in certain cases every Jubilee year at the end of Shmita, the last year of the seven-year agricultural cycle. In modern times, personal debt relief has appeared as a solution for individuals affected by bubbles. For instance, it has been estimated that a United Stated household has an average non-mortgage debt of 19000 dollars. These numbers clearly explain why the United States have recently experienced a massive wave of foreclosures as people find it difficult to make on-time repayments.

Fortunately, there exist many types of debt relief programs: bankruptcy, consumer credit counseling, debt consolidation loan, the debt resolution program, and the continuation of minimum monthly payments to credit companies. Let?s just focus on the first two. Bankruptcy is a lawful solution for someone seeking to get rid of their debt as it reflects the inability to reimburse the money initially borrowed. In such a scenario, an assessment is made on behalf of the debt relief program applicant to determine whether their total liabilities exceed their total assets. Yet, obtaining debt relief through this option leaves a negative mark, which can last for as long as 10 years, on the credit score of the individual, making it complicated to get a bank financing for a new business. Consumer credit counseling is designed for people unable to settle minimum payments due to major financial concerns. This solution may take up to six years to be effective, with the debt amount still waiting to be repaid in full.

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Source: http://www.bestfinancetools.com/debt-relief/

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