Glossary of Terms
Cancellation of Debt: A proposed measure to help impoverished third-world countries get back on their feet.
Debt Capacity: The maximum amount of debt that can be issued by a creditor.
Debt Collection Improvement Act: The DCIA, passed in 1996, allows the Financial Management Services to reduce welfare, social security payments, or to garnish wages to collect for non-tax debt.
Debt Deflation: During recessions people tend to liquidate their assets (such as stocks) and consequently less total dollars in the free market are available. What results is more supply then the demand. Debt generally becomes harder to pay back since periods of deflation are characterized by unemployment and a slow economy.
Debt Load: Your total amount of debt.
Debt to Equity: A company’s debt divided by the portion of the company’s assets that the shareholders own.
Debt to Income ratio: The percentage of your earnings that are used to pay your debt every month
Debt Termination: Beware of companies promising total elimination of your debt, they are promising the impossible. Remember if it sounds too good to be true, it probably is.
Long Term Debt: Borrowing that will be due in a year or more.
Short Term Debt: Borrowings that will be due within a year.