Debt forgiveness (gældseftergivelse)
Also known as write-off of debt, write-down of debt, composition, eftergivelse, nedskrivning af gæld, akkord
Debt forgiveness is when the creditor gives up all or part of its claim — voluntarily or as part of a composition.
Key facts
- Can be
- Voluntary or compulsory
In practice
Sometimes 40% now is better than 100% never. A voluntary composition — where the creditors write the claim down in return for having the rest paid — can yield more than a bankruptcy, where unsecured creditors typically get nothing.
The arithmetic is sober: what do we get from a composition, and what do we realistically get from a bankruptcy? If the answer to the latter is “nothing”, then the composition is not a concession, but the better deal.
Where it commonly goes wrong
- Composition is refused on principle. The principle often costs you the entire claim.
- Debt is forgiven without getting anything in return. Forgiveness should buy something: payment now, security, or a guarantee.