A debt jubilee is when a country or large organization cancels debt and clears it from the public record. Simply put, it’s large-scale debt forgiveness. Some economists believe in enacting a jubilee as a method of preventing a depression, while others believe in more moderate approaches, such as direct-to-consumer stimulus checks.
What Might Cause a Debt Jubilee?
When debt-fueled spending is the catalyst for stimulating the economy during hard times, concern rises over long-term economic stability. Historically, calls for a debt jubilee have occurred when nations have teetered on the edge of an economic depression.
The conditions in which a debt jubilee may occur are similar to those that would call for stimulus checks. The following conditions may increase the likelihood of debt jubilee policies:
- Increasing gaps in wealth
- Sizable consumer debt
- Mass bankruptcy
- A public health crisis
- Widespread job loss
- Sinking stocks
What Would a Debt Jubilee Look Like in America?
Countries have implemented large-scale debt relief in the past to stimulate the economy. For example, Iceland wrote off and subsidized massive amounts of mortgage debt after the country was hit particularly hard by the Great Recession in late 2008.
Debt jubilee was an ancient practice carried out in Babylonia and Syria, and the concept of complete debt annulment isn’t necessarily feasible in modern-day America. However, some large-scale government-initiated debt relief practices in recent history are the closest equivalent we’ve seen. For example, American businesses and corporations implemented debt jubilee relief efforts such as US veteran bonuses during the Great Depression.
For a debt jubilee to happen in America today, banks would need to write off significant amounts of consumer debt—either student, credit card or mortgage debt or a combination of these—and erase it from credit reports. Because of this, many see debt jubilee as a modern method of redistributing equity and resources while fighting against monopolies and the extreme elite.
What Does a Debt Jubilee Mean for Consumers?
The goal of a debt jubilee in America would be to restore Americans’ ability to pay taxes and enjoy more disposable income by freeing them from crippling debt. A debt jubilee may also open up the conversation for what the ideal debt system looks like in America. Many are already advocating for a more just and equitable debt system, including practices such as:
- Individual Voluntary Arrangements (IVAs): An alternative to declaring bankruptcy that involves a contractual agreement with creditors of a payment plan for unsecured debts.
- Reduced stigmatization of bankruptcy: The view that bankruptcy is a viable option rather than a shameful one, and that sometimes outside factors are out of someone’s control.
- Debt forgiveness for poorer countries: The refusal to exploit other nations and the ability to arrive at a mutual understanding with them to maintain peaceful relations.
While our expert team at Lexington Law can’t guarantee debt cancellation, we can help you take steps to get your credit in better shape. Explore our credit repair services to start your journey toward better financial health today.
Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.
Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.
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