Bankruptcy
Its Definition
It is when a man is completely in debt such that his wealth will not be adequate to cover his debts.
Its Regulations
There are certain rules for bankruptcy:
1) It should be interdicted if the creditors, to whom he owes the debts, demand so.
2) All his belongs should be sold except for his clothes and daily essentials, such as his food and drink. Then the value should be divided among the creditors according to their debts.
3) If anyone of the creditors finds his commodity with the man in its original form, he can take it personally rather than others taking it. This is due to the Messenger of Allah’s statement:
“Whoever finds his possession with a person who has gone bankrupt, he has the most right to it.” (Al-Bukhari and Muslim)
This is under the condition that he should not have received any portion of its value. Otherwise, he will be equal to other creditors.
4) Whoever’s straitened circumstance is proved before the authority, meaning that he has no money or commodity for selling to repay his debt, then it is not permissible to demand him to pay the debt or pursue him concerning it. This is due to Allah’s statement:
(And if the debtor is in a hard time (has no money), then grant him time till it is easy for him to repay.) (2:280)
The Messenger of Allah (SAW) said to the creditors of one of the debtors from the Companions:
“Take what you can find, and you have no right to anything other than that.” (Muslim)
5) If a new creditor appears after the division of the property, and he was not aware of any interdiction or selling of the property of the interdicted person, he has to refer to the other creditors in order to obtain his share of debt from them.
6) Whoever knows about the interdiction imposed upon a debtor and he makes a transaction with him thereafter, he has no right to refer to other creditors to obtain his share of debt. Rather, his debt will remain under the obligation of the bankrupt person until he is able to easily repay it.
Textual Format for Recording an Interdiction on the Bankrupt Person
In the Name of Allah. All praises are due to Allah.
“This is to certify that so-and-so court judge bears witness that he has interdicted so-and-so through a valid, legal interdiction. He has barred him from any dealing with his property that he presently possesses as well as what he may possess in the future. He has been completely prohibited from dealings by a judgement that is based upon what is confirmed that he owes of obligatory legal debts that he is responsible for repaying to the creditors of such debts. The debts that he owes to the creditors are more than his property. His total debts are such and such amount with the following details. The property of so-and-so is such and such amount against the receipt voucher, dated such and such. He owes the amount of such and such to so-and-so person. Every creditor has proved his debt before the court, according to the valid legal documentation. All of them have sworn an oath concerning this matter.
After deliberation of the legal proceedings and valid proofs, the court has concluded that he above mentioned debtor is in financially difficult circumstances and unable to repay the above-detailed debts. Moreover, whatever he possesses is not adequate to clear his debt. However, whatever he possesses will be divided according to each creditor’s share. Therefore, this court declares his bankruptcy and imposes an interdiction on his property, legally and officially.
Meanwhile, he is allowed to spend from his wealth on whatever is essentially required for him. Similarly, he is also exempt regarding whomever he is obliged to care for, such as his wife and children, who are so-and-so and so-and-so. This likewise excludes expenses for their daily foods, drinks, and essential requirements. This interdiction and sale of his property will continue until his property and belongings sell out completely and its value is distributed among the creditors according to their shares of debt. This legal document is recorded on such and such date.