14 Oct How to Write off Bad Debt
Did you know there’s a way to write off bad debt? When neither you nor your lender have acknowledged a debt for a certain period, the debt becomes prescribed and can be written debt. Prescribed debt, or prescription debt, is legally unenforceable and can’t be recovered by creditors.
The amount of time a debt takes to prescribe varies by the sort of debt it is, as outlined in the Prescription Act 68 of 1969. For instance, consumer debt prescribes in a shorter time than a mortgage. Also, debt is only prescribed when neither party makes any move to acknowledge the debt–so your creditor doesn’t try to communicate with you or take legal action. You should not have made any promises to repay the debt or repayments.
If this is the case, then your debt is likely prescribed. You might also have been recklessly lent money. Read on to discover how you can write off bad debt and how True North Debt can help.
What’s Prescribed Debt?
Prescribed debt is debt that has gone unacknowledged by both you and your creditor for a certain time. This time varies by the sort. Mortgages can take as long as 30 years to prescribe, for instance.
Note that debt is only prescribed when you or the creditor has not acknowledged the debt. Your creditor must not have made any attempts to call, email, or write to you about the debt. They must not have taken legal action against you or asked you to sign a new agreement. In essence, they must not have made any move to collect the debt.
As the debtor, you must not have made any verbal or written promises to pay the debt, signed a new agreement on how you might pay the debt, made any payment, even partial toward the debt, or shown intent to pay the debt in any way.
It’s important to note that even if a debt has become legally unenforceable (prescribed), it is still unextinguished–it still exists on your credit profile, save for when you take legal steps to get it removed. True North Debt’s attorney can help you with this.
What the Law Says
South African legislators wrote an act to address the issue of prescription debt, called the Prescription Act 68 of 1969. According to the Act, the time period for the prescription of debt is generally three years, although there are exceptions for certain types of debt. This means that if a creditor does not take action to collect the debt within three years, they can no longer enforce it legally.
For debts secured by a mortgage bond, judgment debts, debts related to taxation, and debts owed to the government regarding profits or royalties from mining rights, a prescription period of 30 years applies.
Another Way to Write off Bad Debt: Reckless Lending
If someone lent you money in the knowledge that you couldn’t afford it, you might be able to write off some or all of the debt. This is because lending consumers money when they can’t afford it is called reckless lending, and is an offence under the National Credit Act, one of the government’s debt measures.
True North Debt can assess whether you were recklessly lent money or whether your debt is prescribed, then help you take action to write off the debts. Contact us today and find out how you can write off bad debt. Debt help is here, make use of it!