Legal Definitions - debt retirement

Debt retirement refers to the complete repayment of a financial obligation. It signifies the full settlement of a loan, bond, or any other form of debt, thereby ending the borrower's responsibility to the lender.

Here are some examples illustrating debt retirement:

• Example 1: Personal Mortgage

  After 30 years of making regular payments, a homeowner sends their final mortgage payment to the bank. Upon receiving this payment, the bank releases the lien on their property, confirming that the homeowner no longer owes any money for the house.

  This illustrates debt retirement because the homeowner has fully satisfied their financial obligation to the bank, completely paying off the principal and interest of the mortgage loan.

• Example 2: Corporate Bonds

  A technology company that issued corporate bonds five years ago to fund its expansion reaches the maturity date for those bonds. On this date, the company transfers the principal amount back to all bondholders, as per the original agreement.

  This is an instance of debt retirement because the company has fulfilled its promise to repay the investors who lent it money, thereby eliminating that specific debt from its financial records.

• Example 3: Government Infrastructure Loan

  A city government secured a large loan from a national development bank to build a new wastewater treatment plant. Over the next two decades, the city allocates a portion of its annual budget to make principal and interest payments. Once the final payment is made, the city announces that the loan for the treatment plant has been fully repaid.

  This demonstrates debt retirement as the city has completely discharged its financial duty to the development bank, settling the entire loan amount and removing the obligation from its municipal finances.