Debt removal or debt cancellation is partial or total debt forgiveness, or slowdown or cessation of debt growth, owned by an individual, company, or country.
From antiquity to the nineteenth century, this refers to domestic debt, particularly agricultural debt and freeing debt slaves. At the end of the 20th century, it primarily refers to the debt of the Third World, which began to explode with the Latin American debt crisis (Mexico 1982, etc.). At the beginning of the 21st century, the increase of its application for individuals in developed countries, due to credit bubbles and housing bubbles.
Video Debt relief
International debt help
First World War Reparation
War debt payments by World War I Allies to the US were terminated in 1931 - only Finnish paid full - and American public opinion demanded repayment as a condition of postwar US aid. Germany has suspended its reparations payments because of the 1919 Versailles Treaty and is paid to the UK, France and others, as well as loans due to the United States. Chancellor Konrad Adenauer decided that the permanent good would demand their return. The 1953 Treaty on Foreign Debt, which continued the German war reparations, is an obvious example of the abolition of international debt.
Reduced State Debt
Debt relief for developing and owed indebted nations is subject to the 1990s campaign by a large coalition of development NGOs, Christian organizations and others, under the banner of Jubilee 2000. This campaign, which involved, for example, demonstrations in 1998 The G8 meeting in Birmingham, successfully pushed debt relief into the agenda of Western governments and international organizations such as the International Monetary Fund and the World Bank. The Poor State Debt Initiative (HIPC) was eventually launched to provide systematic debt assistance to the poorest countries, while trying to ensure that money will be spent on poverty reduction.
The HIPC program has been subject to requirements similar to those often associated with the International Monetary Fund (IMF) and World Bank loans, requiring structural adjustment reforms, sometimes including the privatization of public utilities, including water and electricity. To be eligible for non-cancelable debt cancellation, countries should also maintain macroeconomic stability and implement the Poverty Reduction Strategy satisfactorily for at least one year. Under the goal of reducing inflation, some countries have been pressed to reduce spending on health and education sectors. While the World Bank considers the HIPC Initiative a success, some scholars are more critical of it.
The Multilateral Debt Relief Initiative (MDRI) is an extension of the HIPC. MDRI was approved after the Gleneagles G8 meeting in July 2005. Offer 100% multilateral debt cancellation owned by HIPC countries to the World Bank, IMF and African Development Bank.
Arguments against debt relief
Opponents of debt help argue that it is a blank check to the government, and fear that savings will not reach the poor in corruption-ridden countries. Others argue that countries will go out and contract further debt, under the belief that these debts will also be forgiven in the future. They use money to increase the wealth and spending capabilities of the rich, many of whom will spend or invest this money in rich countries, so that it does not even create a trickle-down effect. They argue that the money will be much better spent on a special aid project that really helps the poor. They further stated that it is unfair for third world countries to successfully credit them successfully, or not get into debt in the first place. That is, he actively encourages third world governments to spend money in order to get debt relief in the future. Others opposed the requirements associated with debt relief. These structural adjustment conditions have a history, especially in Latin America, to expand the gap between the rich and the poor, as well as increase the economic dependence on the global North.
Maps Debt relief
Personal debt removal
Origins
Debt relief is in some ancient societies: Debt forgiveness is mentioned in the Book of Leviticus (a Jewish-Christian scripture), where God guides Moses to forgive debt in certain cases each year of Jubilee - at the end of Shmita, the last year of seven years. cycle of agriculture year or cycle of 49 years, depending on the interpretation.
If the debtor is in trouble, give him time to make it easy for him to pay back. But, if you send it with charity, it's best for you if you just know.
Contemporary
In the United States for many years before the 2007-2008 financial crisis, non-residential personal debt (car loans, credit cards, student loans, etc.) rose significantly from about $ 2.05 trillion in early 2003 to its peak. $ 2.71 in Q4 of 2008. Not until Q3 of 2012 unsecured personal debt reaches this level again. Since then, unsecured personal debt has risen steadily to $ 3.76 trillion by the end of the third quarter of 2017. Another major change in unsecured personal debt is that the increase in the portion now is student debt, from 12% in Q1 of 2003 up to 53% in Q3 2017.
The increasing size of private non-residential debt market and the ease with which one can obtain personal credit has led some consumers to lag behind payments. In Q3 2017, student loans have the highest rate of serious delinquency (90 days or more in arrears) with about 9.6% of all student loan debt falling into this bucket. Credit card debts and car loan debts have a serious offense rate of 4.6% and 2.4% respectively.
When consumers start to miss payments, they have several options to pay off debts, either in full or in part. The first method is to declare bankruptcy, which has the immediate effect of stopping any payments made to creditors. In the United States, the two main avenues of bankruptcy for an individual are Chapter 13 bankruptcy and Chapter 7 bankruptcy. Another option is to consolidate these debts into a single loan, commonly known as debt consolidation. Debt elimination, on an individual level, refers primarily to negotiations for debt reduction by consumers or debt settlement agencies. Through this arrangement, the consumer agrees to pay the creditor a fixed amount of money (generally a discount on their debt) either in the amount of one at a time or under the payment plan. The debt settlement industry has had significant regulatory oversight from the start with changes implemented in 2010 by the FTC. Since personal debt relief is a highly regulated industry, consumers are urged by the FTC and other trade organizations to conduct significant research and find independent credit counselors to guide them through the process.
Tax treatment
In US tax laws, forgivenable debt is treated as income, because it reduces liabilities, increases the net worth of taxpayers. In the context of the overflowing of the housing bubble of the United States, the 2007 Mortgage Forgiveness Debt Act states that the debt forgiven at the primary residence is not treated as income, since the debt is forgiven in the 3 year period 2007-2009. The Emergency Economic Stabilization Act of 2008 extends this by 3 years to a period of 6 years 2007-2012.
Bankruptcy and non-recourse loans
The main mechanism of debt removal in modern society is bankruptcy, in which a debtor who can not or does choose to pay their debt file for bankruptcy and renegotiate their debts, or a creditor initiates this. As part of debt restructuring, the terms of the debt are changed, which may involve reduced debt. In case the debtor chooses bankruptcy despite being able to service the debt, this is called strategic bankruptcy.
Certain debts can fail without a general bankruptcy; this is a non-recourse loan, especially mortgages in the jurisdiction of common law such as the United States. Choosing to default on such a loan despite being able to serve is called a strategic standard.
Alternative
Historical
If debt can not or is not paid, a common but historically rare alternative now rarely includes debt bondage - including debt repayment: tied until debt is repaid; and debt bondage, when the debt is so great (or the value of labor is so low) that the debt will never pay off - and the debtors' prison.
Debt bondage can last from generation to generation, future generations are made working to repay debts incurred by past generations. Debt bonds are currently regarded as a form of "modern slavery" in international law, and are prohibited as such, in Article 1 (a) of the 1956 United Nations Supplementary Convention on the Abolition of Slavery. However, this practice continues in some countries. In most developed countries, debt can not be inherited.
Prison jails have largely been removed, but remain in some form in the US, for example if a person fails to make child support payments.
Contemporary
In modern times, the most common alternative to debt relief in cases where debt can not be paid is patience and debt restructuring. Patience which means interest payments (possibly including maturity) are forgiven, as long as payment is continued. No principal reductions occur.
In debt restructuring, existing debt is replaced with new debt. This can lead to a reduction in principal (debt relief), or it can easily change the terms of payment, for example by extending the term (replacing the debt repaid over 5 years with one payment for 10 years), allowing the same principle to be amortized over a period of time long, allowing for smaller payouts.
Personal debt that can be paid back from income but if not being paid can be obtained through deductions or attachment of income, which reduces the debt of wages.
Inflation
Inflation, a reduction in the nominal value of currency, reduces the real value of debt. While lenders take into account inflation when they decide on loan terms, an unexpected rise in the inflation rate leads to categorical debt relief.
Inflation has become a contentious political issue on this basis, underestimating currency as a form or an alternative to the state default, and free silver in the late 19th century America is seen as a conflict between the debtor farmer and the creditor banker.
Inflation, in a growing economy, is caused by more money being introduced into the circulation by the central bank. If the number of tenders remains constant, the currency grows or falls at the level of the reserve that supports it. The global prevalence of fractional reserve banking has caused most currencies to decline in value consistently. In non-fractional (fully supported) backup systems, currency growth is equal to the growth (or decrease) of assets that support it, the costs are charged in the initial way, and the money is valued by what is supported.
Fractional reserve banking has resulted in the transfer of wealth from currency holders to investors. Under fractional reserve banking, money supply is allowed to increase whenever newly issued interest loans are often restricted by the reserve ratio, which mandates that banks hold a portion of the wealth they lend at interest in the form of real reserves.. Many countries are in the process of eliminating the reserve ratio.
Debt removal in art
Debt relief plays an important role in several works of art: in the drama Merchants of Venice by William Shakespeare, c. 1598, the hero pleads for debt relief (pardon) on the basis of Christian mercy. In the 1900 novel The Wonderful Wizard of Oz, the main political interpretation is that it treats free silver, which inflicts and thereby reduces debt. In the 1999 film Fight Club (but not the novel that became the basis), the climactic event was the destruction of credit card records - dramatized as the destruction of skyscrapers - affecting the elimination of debt. TV series 2015, Mr. Robots, following a group of hackers whose primary mission is to cancel all debts by dropping one of the world's largest companies, E Corp.
See also
- The anti-globalization movement
- Eurodad
- Highly indebted poor countries (HIPC)
- International developments
- Jubilee USA Network
- Multilateral Debt Relief Initiative (MDRI)
- Unusual debts
- Survie NGO activist to Third World debt
- Zuism
References
Source of the article : Wikipedia
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