If a debt is sent to a debt collection agency but there is. law in that state that debt collectors cannot pursue someone who is in hardship after six years. The debt collectors then cease chasing this debt and close the file. Is this the same as being forgiven?
Answer:
All perfect praise be to Allah, The Lord of the Worlds. I testify that none is worthy of worship except Allah and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and messenger.
If the debtor is insolvent, then the creditor must give him respite [until he becomes able to repay], as Allah Says (what means): {And if someone is in hardship, then [let there be] postponement until [a time of] ease.} [Quran 2:280]
If the debtor becomes solvent, then he is obliged to take the initiative to repay his debt. If the authority specialized in collecting the debts has renounced asking the debtor [to repay] and closed the debt file after six years in accordance with the law governing the work of these entities, then this does not mean that the debtor is cleared of the debt. Rather, this only means ceasing to pursue the debt. If it is assumed that there is a law that rules that the debt is waived from the debtor after six years, then this law is null and void.
Ibn ‘Aabideen, may Allaah have mercy upon him, one of the Hanafi scholars, said in “Rad Al-Muhtaar ‘Ala Ad-Dur Al-Mukhtaar“: “One of the null and void verdicts (issued by a judge) is to rule that the right is waived by the passing of years.” [End of quote]
Therefore, the debtor who is able to repay the debt is obliged to pay it back to the owner, and if the creditor willingly agrees to renounce the debt from the debtor, then this is a remission (pardon) by which the debtor is acquitted from liability (and sin). Otherwise, rights are not waived by the passing of time.
Allah knows best.