Debt simplification (a.k.a. "simplify debts" or "debt shuffling") is a feature of Splitwise that restructures debt within a groups and across friendships. It does not change the total amount that anyone owes, but it makes it easier to pay people back by minimizing the total number of payments.
For example: say Anna, Bob, and Charlie share an apartment. Anna owes Bob $20, and Bob owes Charlie $20. Rather than making two separate payments, Splitwise would tell Anna to pay $20 to Charlie directly, minimizing the number of total payments. This ensures that people are paid back more quickly and efficiently.
Read our blog post here about it: http://blog.splitwise.com/2012/09/14/debts-made-simple/You can turn on the "simplify debts" setting within a group from the group settings screen. With "simplify debts" enabled, the group will automatically simplify your debts any time a new transaction is added to the group.