Editing Debt relief (section)

==Personal debt relief==
===Origins===
{{main|History of debt relief}}
Debt relief existed in a number of ancient societies:
* Debt forgiveness is mentioned in the [[Book of Leviticus]] (a [[Judaism|Judaeo]]-[[Christianity|Christian]] scripture), in which God counsels [[Moses]] to forgive debts in certain cases every [[Jubilee (Biblical)|Jubilee year]] – at the end of [[Shmita]], the last year of the seven-year agricultural cycle or a 49-year cycle, depending on interpretation.
* This same theme was found in an ancient bilingual [[Hittite language|Hittite]]-[[Hurrian language|Hurrian]] text entitled "The Song of Debt Release".<ref>{{cite journal |first=William |last=Harms |title=Linking ancient peoples |url=http://chronicle.uchicago.edu/960201/hittites.shtml |journal=The University of Chicago Chronicle |volume=15 |issue=10 |date=1996-02-01 |access-date=2009-02-26}}</ref>
* Debt forgiveness was also found in [[Ancient Athens]], where in the 6th century BCE, the lawmaker [[Solon]] instituted a set of laws called [[seisachtheia]], which canceled all debts and retroactively canceled previous debts that had caused slavery and serfdom, freeing debt slaves and debt serfs.
* In addition, the [[Qur'an]] (the [[Muslim]] [[scripture]]) supports debt forgiveness for those who are unable to pay as an act of charity and remission of sins for the creditor. The injunction is as follows:
{{quote|If the debtor is in difficulty, grant him time till it is easy for him to repay. But, if ye remit it by way of charity, that is best for you if ye only knew.|Qur'an 2:280 <ref>{{cite web|url=http://www.islamic-relief.com/InDepth/downloads/islamanddebt.pdf|title=Islamic Relief Worldwide - Faith inspired action|url-status=unfit|archive-url=https://web.archive.org/web/20091231050355/http://www.islamic-relief.com/InDepth/downloads/islamanddebt.pdf|archive-date=2009-12-31}}</ref>}}In the United States, the first serious movements to create debt relief were rooted in debtor farmer grievances against creditors. 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. The first federal bankruptcy law, passed in 1841 and repealed in 1843, was re-introduced and expanded in 1867. 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.<ref>{{Cite web |last=Waters |first=Michael |date=2024-10-30 |title=An Overlooked Path to a Financial Fresh Start |url=https://www.theatlantic.com/family/archive/2024/10/bankruptcy-law/680451/?utm_content=bufferbdbc5&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer |website=The Atlantic |language=en}}</ref><ref>{{Cite book |last1=Zackin |first1=Emily |url=https://books.google.com/books?id=4-gEEQAAQBAJ |title=The Political Development of American Debt Relief |last2=Thurston |first2=Chloe N. |date=2024 |publisher=University of Chicago Press |isbn=978-0-226-83237-1 |language=en}}</ref>

===Contemporary===
In the United States of America for the years preceding the [[2008 financial crisis]], non-housing personal debt (auto loans, credit cards, student loans, etc.) rose significantly from approximately $2.05 trillion at the start of 2003 to a peak of $2.71 trillion in Q4 of 2008.  It was not until Q3 of 2012 that unsecured personal debt reached this level again.  Since that time, unsecured personal debt has risen steadily to $3.76 trillion at the end of the third quarter of 2017.<ref>{{Cite web|url=https://www.newyorkfed.org/microeconomics/hhdc.html|title=The Center for Microeconomic Data - FEDERAL RESERVE BANK of NEW YORK|website=www.newyorkfed.org|access-date=2017-11-28}}</ref> The other large change in unsecured personal debt is that an increasing portion of it is now student loan debt, from 12% in Q1 of 2003 to 53% in Q3 of 2017.

The increasing size of the non-housing personal debt market and ease with which one can obtain personal credit has led to some consumers falling behind on payments.  As of Q3 2017, student loans have the highest rates of serious delinquency (90 or more days delinquent) with approximately 9.6% of all student loan debt falling into this bucket.  Credit card debt and auto loan debt have serious delinquency rates of 4.6% and 2.4% respectively.<ref>{{Cite web|url=https://www.newyorkfed.org/newsevents/news/research/2017/rp171114|title=Total Household Debt Increases, Delinquency Rates of Several Debt Types Continue Rising - FEDERAL RESERVE BANK of NEW YORK|website=www.newyorkfed.org|access-date=2017-11-28}}</ref>

When consumers begin to fall behind on payments, they have several options to discharge the debt, either in full or in part.  The first method is declaring bankruptcy, which has the immediate effect of stopping any payments made to creditors.  In the United States, the two primary avenues of bankruptcy for an individual are [[Chapter 13, Title 11, United States Code|Chapter 13]] bankruptcy and [[Chapter 7, Title 11, United States Code|Chapter 7]] bankruptcy.  Another option is to consolidate these debts into a single loan, commonly known as [[debt consolidation]].  Debt relief, on an individual level, refers mainly to the negotiation for a reduction of a debt by either the consumer or a debt settlement agency.  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.  The debt settlement industry has had significant regulatory scrutiny since its inception with changes implemented in 2010 by the FTC.<ref>{{Cite news|url=https://www.ftc.gov/news-events/press-releases/2010/07/ftc-issues-final-rule-protect-consumers-credit-card-debt|title=FTC Issues Final Rule to Protect Consumers in Credit Card Debt|date=2010-07-29|work=Federal Trade Commission|access-date=2017-11-28|language=en}}</ref> 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.<ref>{{Cite news|url=https://www.consumer.ftc.gov/articles/0153-choosing-credit-counselor|title=Choosing a Credit Counselor|date=2012-11-01|work=Consumer Information|access-date=2017-11-28|archive-date=2017-11-29|archive-url=https://web.archive.org/web/20171129132540/https://www.consumer.ftc.gov/articles/0153-choosing-credit-counselor|url-status=dead}}</ref>

In 2019, the Texas Legislature forgave an estimated $2.5 billion in debt when it abolished<ref>{{Cite web|url=https://www.texastribune.org/2019/08/20/Texas-driver-responsibility-program-repeal-what-that-means-explained/|title=Texas' Driver Responsibility Program ends next month. Here's what that means for you.|last=Closson|first=Troy|date=2019-08-20|website=The Texas Tribune|language=en|access-date=2020-02-13}}</ref> its "Driver Responsibility Surcharge"<ref>{{Cite web|url=https://gritsforbreakfast.blogspot.com/2019/06/driver-responsibility-surcharge.html|title=Grits for Breakfast: Driver Responsibility surcharge abolition, by the numbers|last=Gritsforbreakfast|date=2019-06-28|website=Grits for Breakfast|access-date=2020-02-13}}</ref> 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. Surcharges were created in 2003 to pay for a roadway network that was never built, and instead half the money was diverted to hospitals, which became reliant on the money, with the rest going into the state treasury. However, the majority of drivers who had surcharges assessed could not pay them. Many people who could not afford either surcharges or insurance continued to drive and racked up huge sums in debt they could never expect to pay. A little-advertised amnesty program and an indigence program that still required partial payment helped some, and were criticized by some who felt it was unfair that they paid and others didn't.<ref>{{Cite web|url=https://gritsforbreakfast.blogspot.com/2010/11/does-drp-amnesty-punish-those-who-play.html|title=Grits for Breakfast: Does DRP amnesty punish those who play by the rules?|last=Gritsforbreakfast|date=2010-11-07|website=Grits for Breakfast|access-date=2020-02-13}}</ref> But local sheriffs began to complain that the law was causing the jails to fill up with people driving on suspended license, and the judiciary insisted the law was unfair and counterproductive to public safety.<ref>{{Cite web|url=https://gritsforbreakfast.blogspot.com/2011/01/declining-dwi-convictions-and.html|title=Grits for Breakfast: Declining DWI convictions and the unmitigated failure of the Driver Responsibility surcharge|last=Gritsforbreakfast|date=2011-01-10|website=Grits for Breakfast|access-date=2020-02-13}}</ref> 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. The same year, the Legislature eliminated red-light cameras statewide and effectively canceled those debts, and re-defined "undue hardship" in the Code of Criminal Procedure to allow judges to waive traffic-fine debt for more people.<ref>{{Cite web|url=https://gritsforbreakfast.blogspot.com/2019/05/scaling-back-justice-debt-biggest.html|title=Grits for Breakfast: Scaling back justice debt biggest #cjreform accomplishment of 2019 #txlege|last=Gritsforbreakfast|date=2019-05-30|website=Grits for Breakfast|access-date=2020-02-13}}</ref>

====Tax treatment====
In [[Taxation in the United States|US tax law]], debt forgiven is treated as income, as it reduces a liability, increasing the taxpayer's [[net worth]]. In the context of the bursting of the [[United States housing bubble]], the [[Mortgage Forgiveness Debt Relief Act of 2007]] provides that debt forgiven on a primary residence is not treated as income, for debts forgiven in the three-year period 2007–2009. The [[Emergency Economic Stabilization Act of 2008]] extended this by three years to the six-year period 2007–2012.