Lessons from past episodes of debt relief
What is the point of debt relief?
Debt relief refers to measures to reduce or refinance debt in order to make it easier for the borrower to repay it.
Options for debt relief include forgiving a portion of the debt, lowering the interest rate, stretching payments over a longer period, or consolidating multiple debts into a single, lower-interest one.
What are the benefits of debt relief?
Pros of debt settlement
Settle your debts for less than you owe.Get help resolving your debts.Pay off debts sooner than you would otherwise.What happens when you use debt relief?
Debt relief companies work to settle your debts, reducing the total amount you owe.
But in addition to a large fee, their services can come with risks, including credit damage, a large tax bill, and even potential lawsuits.
- Bankruptcy and non-recourse loans
The primary mechanism of debt relief in modern societies is bankruptcy, where a debtor who cannot or chooses not to pay their debts files for bankruptcy and renegotiates their debts, or a creditor initiates this.
Callaghy (2002) and Easterly (2002), examine the history and evolution of Paris Club restructurings up to and including HIPC; Cheng, Diaz-Cassou, and Erce (2019) Autres questions