Debt relief is the total or partial forgiveness of the debt from the creditor to the debtor, this way it facilitates payments. In a bank, if a debt relief occurs, the financial entity confiscates the owner´s funds and/or saving without his/her consent.

It is a very common used resource in insolvency proceedings because this way at least one creditor can receive even a portion of his/her money from the debt.

For example, if a person owes another 100 euros and cannot pay for it, the collector has the option to make a reduction of the debt. To this matter, they make an agreement in which the debtor only pays back 70 euros, but the creditor secures them. In this case, the debt relief would be a 30%.

An example of a bank debt relief derives from the measures imposed on Cyprus during its inside bailout. To get the European funds needed to recapitalize an important part of its banking sector, specially Cyprus bank and Laiki bank, the country signed an agreement with the euro-group authorities for which the government could “release”, or take over, about 40 to 60 percent of the deposits over 100.000€;, as well as most part of the deposits in Laiki bank. In the case of Cyprus bank, these deposits were converted in stocks belonging to the bank.