Debt cancellation can be granted to individuals, businesses, or countries in various circumstances. Credit card companies and mortgages may have debt cancellation policies, and student loan debt cancellation is rare. Lending countries may offer debt cancellation to poorer countries or after catastrophic events.
Debt cancellation refers to complete absolution from debt, which can be granted to individuals, businesses, or even countries in a variety of circumstances. For most people, debt owed to credit card companies or other businesses can be discharged if a person files for bankruptcy. Filing bankruptcy does not necessarily result in the cancellation of all debts. People with large student loans may still be required to repay them even after filing bankruptcy.
Sometimes certain types of debt have debt cancellation policies. For example, credit card companies may sell insurance that would allow you to pay off debt in extreme circumstances, such as the loss of a spouse, total disability, or loss of employment. Most often, a credit card company will step in and make minimum payments for you if any of the above events occur, eventually having to resume payments once your circumstances improve.
Some mortgages also have debt cancellation policies, and in the wake of the many foreclosures that occurred in the 2000s due to bad credit practices, some mortgage companies have offered debt cancellation so that if a person sells a home for less than what you owe, not responsible for paying extra money on the mortgage. Reading your mortgage policy carefully is the surest way to find out under what circumstances, if any, debt cancellation would be offered.
Occasionally, people may also qualify for student loan debt cancellation. More often, they are allowed to defer payment if they have financial problems. In some circumstances, such as being able to prove total disability, your loan repayment obligations may end. These are rare circumstances. On the other hand, individual student loans are the responsibility of a single person.
If a spouse with a student loan dies, the surviving spouse is generally not required to repay the loans. They are immediately subject to debt cancellation. Here too there are exceptions. If parents take out a parent loan for their child, both parents may be responsible for repaying the loan and this is not affected by the death of a spouse.
A common issue in politics, especially in countries that lend significant amounts of money to poorer countries, is whether debt cancellation could be considered. Sometimes a very poor country has no way to achieve economic stability while the debts remain, and the debts become an ongoing burden that prevents the country from recovering the economy. In these circumstances, the lending country may offer to cancel the debt, so that the poorer country has a chance to start anew, and keep or invest any profit it may make, or use it for the benefit of the country’s citizens. Debt cancellation of other countries could also be considered in the aftermath of disastrous or catastrophic events.
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