Debt Reduction & Debt Relief

I. Introduction
Debt Relief
Investopedia
Reviewed by Julia Kagen
Updated Dec 14, 2017
Definition of Debt Relief
Debt relief is 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. Debt relief can take a
number of forms: reducing the outstanding principal amount (again, either partly or
fully), lowering the interest rate on loans due, and/or extending the term of the loan,
among others.
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 highlyindebted
party, from individuals and small businesses, to large companies,
municipalities, and sovereign nations.
Breaking Down Debt Relief
In a number of situations, debt relief may be the only course of action. 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.
Page 19 of 147