Have you ever heard of “negative amortization?” The term refers to debt that increases faster than you can pay it off. Usually negative amortization occurs because the interest on a loan or some credit exceeds the minimum payment that the in-debt person is making. But ever since 2003 — when financial rules were changed to force lenders to make their minimum payments at a level that would pay off the debt “over a reasonable period of time” — negative amortization has become increasingly rare.

It may appear that your principal simply isn’t changing from month to month, even if you are making payments. There are a couple of possibilities if this is true. I could be that your minimum payment simply is too low and that you should increase your payments; or it could be that your lender has run afoul of the rules, and your debt could be challenged.

However, let’s assume everything is legally compliant: what can an individual or business do to overcome this apparent negative amortization?

A Chapter 13 filing could be very beneficial for an individual. The repayment plan that you agree to under this bankruptcy could dramatically reduce the total amount of debt you owe; or it could lower your monthly payments; or both.

For a business, apparent negative amortization can occur after you have closed your company and are trying to clear out old debts — some of which can exceed the value you obtained from liquidating your defunct company’s assets. You should consult a bankruptcy attorney to get detailed and accurate advice for your situation.

Source: CreditCards.com, “Repayment, Settlement, Bankruptcy: Facing Debt from Failed Business,” Elaine Pofeldt, Aug. 7, 2013