Debt relief

In World War I the United States Treasury made large loans to the Allies that were postponed, reduced and finally paid off in 1953.

To qualify for irrevocable debt relief, countries must also maintain macroeconomic stability and implement a Poverty Reduction Strategy satisfactorily for at least one year.

[7] Debt relief existed in a number of ancient societies: If the debtor is in difficulty, grant him time till it is easy for him to repay.

In the early 19th century, legislators created pathways for indebted farmers to take creditors to court to erase what they owed and enable them to start over.

At the time, this was a comparatively radical approach to debt relief in the world, making the United States one of the most debtor-friendly countries.

Through this arrangement, consumers agree to pay the creditor a fixed amount of money (generally a discount on their outstanding debt) either in a lump sum or under a payment plan.

[14] As the disposition of personal debt is a highly regulated industry, consumers are urged by the FTC and other trade organizations to do significant research and find an independent credit counselor to guide them through the process.

[15] In 2019, the Texas Legislature forgave an estimated $2.5 billion in debt when it abolished[16] its "Driver Responsibility Surcharge"[17] in all but driving while intoxicated (DWI) cases.

This surcharge was an extra three-year civil penalty added onto certain criminal traffic infractions like DWI or driving without a license or insurance.

[19] Finally, in 2019, the Legislature found different sources to fund hospitals and eliminated the surcharge, along with around $2.5 billion in debt owed by around 1.4 million people.

[20] In US tax law, debt forgiven is treated as income, as it reduces a liability, increasing the taxpayer's net worth.

Certain debts can be defaulted on without a general bankruptcy; these are non-recourse loans, most notably mortgages in common law jurisdictions such as the United States.

Inflation has been a contentious political issue on this basis, with debasement of currency a form of or alternative to sovereign default, and the free silver in late 19th century America being seen as a conflict between debtor farmers and creditor bankers.

[23] A 2025 study of medical debt relief found no evidence that it led to improvements in mental and physical health, healthcare utilization, and financial wellness.

In the play The Merchant of Venice by William Shakespeare, c. 1598, the heroine pleads for debt relief (forgiveness) on grounds of Christian mercy.

In the 1900 novel The Wonderful Wizard of Oz, a primary political interpretation is that it treats free silver, which engenders inflation and hence reduces debts.