It can reset on a schedule. Everybody knows it's coming. It ensures that debt's don't grow so much that they warp other aspects of the economy. I believe it was done in the past to avoid the large scale virtual enslavement of the poor via debt. It was meant to be a relief valve of sorts.
Interest rates would skyrocket because the default risk of lendees just went up a lot. I'm not a fan of this idea, the debt market will figure out a way to be compensated all the same (or else refuse to provision debt, which is also a bad outcome).
