The Severance Indemnity Fund (FGTS) is a vital resource for millions of Brazilian workers, serving as a financial safety net in times of need. However, many wonder if it's possible to use this fund to pay off debts.

What is the FGTS?

The FGTS (Unemployment Fund for Workers) was established in 1966 as a way to protect workers dismissed without cause, guaranteeing them a type of compulsory savings. The employer is required to deposit a monthly amount equivalent to 8% of the worker's salary into an account linked to the FGTS. This fund is managed by Caixa Econômica Federal and can be used in specific situations, such as home purchases, retirement, serious illnesses, and natural disasters.

Using FGTS to Pay Debts: Possibilities and Limitations

The Severance Indemnity Fund (FGTS) represents an important financial reserve for Brazilian workers, offering economic security in a variety of scenarios. Among the most frequently asked questions about the FGTS is whether it can be used to pay off debts. 

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Amortization of Real Estate Financing

One of the main ways to use the FGTS is to pay off mortgages. The FGTS balance can be used to reduce the mortgage installment amount or the outstanding balance, thus alleviating the burden of monthly payments.

Payment of Late Installments of Real Estate Financing

In cases of financial hardship, the FGTS can also be used to pay overdue mortgage installments. This measure can help prevent property loss through foreclosure.

Real Estate Consortium Payment

The FGTS can be used to pay off or amortize real estate consortia, provided the worker has worked for at least three years under the FGTS regime, even if not consecutive, and does not have an active loan with the Housing Finance System (SFH).

Not Allowed for Other Types of Debt

It's important to note that, except in the cases mentioned above, the FGTS cannot be used to pay other debts, such as personal loans, credit cards, or vehicle financing. The fund has a specific purpose and its use is restricted to situations previously established by law.

Procedures for Using FGTS

To use the FGTS to pay debts, you must follow some procedures:

  • Checking the FGTS Balance: The worker must check the available balance in their FGTS-linked account through the Caixa Econômica Federal website or the FGTS app.
  • Contact the Financial Institution: If you wish to use the FGTS to pay off or amortize a mortgage, you must contact the financial institution responsible for the financing to obtain information on the necessary procedures.
  • Required Documentation: Generally, it will be necessary to present documents proving the need to use the FGTS, such as proof of income and income tax return.
  • Authorization to Use FGTS: After analysis and approval by the financial institution, the worker must sign an authorization to use FGTS to pay the debt.
  • Released by the Managing Body: After authorization, the FGTS amount will be released by the fund's managing body, in this case Caixa Econômica Federal, directly to the financial institution.

Although the FGTS is an important financial tool for Brazilian workers, its use to pay debts is limited to specific situations, such as repaying mortgages and paying off real estate consortia. 

For other types of debt, such as personal loans and credit cards, the FGTS cannot be used. Therefore, it's crucial to understand the possibilities and limitations of using the FGTS to pay debts and seek appropriate guidance if you have any questions.

See also: When can I withdraw my FGTS withheld? See information

April 18, 2024