I am emigrating, what happens to my unsecured debt?

I have credit cards and personal loans - can I still do a financial emigration?

I am emigrating, what happens to my unsecured debt (credit cards, personal loan)? Can I still do a financial emigration with debt in place?

Melony Jacoby - Mvest Finance

You can emigrate and not pay your short-term/unsecured debt.  When you emigrate, the country you are emigrating to will not do a credit check on the country you were initially a citizen of and check if you have settled your debt.

However, there is a moral and ethical obligation for yourself as a citizen of a country to do the right thing and settle your debt. You don’t want to reap what you have not sowed.

Here is a scenario as an example to assist you with your question:

A couple left South Africa to live in London and acquired citizenship after the prescribed period they had to live there on an ancestral visa. They left with debt, tax owing to Sars and credit card debt with the bank they banked with. Furthermore they had retirement annuities (RAs) which they made paid up; they were under 55 years of age and therefore could not ‘retire’ from their RAs. The proceeds of an RA can be paid to the member on official proof of emigration. When the couple acquired citizenship, they requested their paid up RAs to be paid to them.

In order to be paid the proceeds of his RA, the client had to provide various documentation, one of which is a tax clearance certificate. The bank he was dealing with prior to leaving, requested settlement of an outstanding credit card with interest and lawyers’ fees for the recovery of the debt. The client’s bank, once all overdrafts/credit cards had been settled, applied to the Reserve Bank to open a blocked account. A blocked account is needed to pay any amounts owing from banks, insurance companies, savings accounts etc and thereafter to facilitate payment to the emigrant.

Further, when he applied for a tax clearance certificate, his tax returns hadn’t been submitted from the time the couple had left SA, and he had to appoint an accountant to sort out his tax, and pay Sars outstanding tax plus penalties, in order to acquire a tax clearance certificate.

Lastly, many people leave South Africa and leave their parents behind. 

In this instance, the parents could pass on and leave an inheritance to their children who are now living overseas and that have not ‘officially’ immigrated. This will in effect create a scenario whereby the children will have to come back to SA, and open bank accounts to receive the inheritance. Think about Fica here, debt that hasn’t been settled, potentially being black-listed, or having to officially immigrate: all this will cause is a delay in the estate being wound up.

In conclusion, you don’t have to settle your short-term unsecured debt, but that would be unethical and morally incorrect. Should you leave SA with investments that you can only transfer when you emigrate, any unsettled debt/taxes etc, will rear its head at some stage during this process.

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