11. BANKRUPTCY
BANKRUPTCY (TAFLIS)
(Bankruptcy occurs when the Islamic magistrate makes a debtor bankrupt by (declaring him so and) forbidding him to dispose of his property (such that if he disposes of it, his disposition is not affected).)
When someone obliged to pay a current debt is being asked to pay it, and he claims that he is unable to (while his creditors deny this), then if it is known that he has saleable property, he is kept ‘Under arrest until he provides evidence that he cannot pay. If not (i.e. if it is not known that he has saleable property), then he swears an oath (that there is no property), and (when it is established that he is unable to pay, whether through evidence, or through his oath) he is released (and given time) until his circumstances allow him to pay (and his creditors may not keep after him, because of Allah’s word,
“If there be someone in difficulties, let him have respite until things are easier” (Quran 2:280).
But if he has saleable property (such as real estate, home furnishings, or livestock) and refuses to pay his debt, then the Islamic magistrate sells it for him and pays his debt. If the proceeds of the sale are insufficient to cover the debt, and he or his creditor asks the magistrate that he be suspended from dealing in his property, then this is done (obligatorily, if requested). When the person is suspended, his disposal over his own saleable property is not legally binding or effective, and the magistrate pays the person’s expenses and those of his family (whom he is obliged to support out of this (suspended) property if he is unable to earn enough to pay his expenses.
Then (after the person has been suspended) the magistrate sells the property in the most profitable manner and divides the proceeds according to the percentage of the total debt which is owed to each creditor.
If one of the creditors is owed money on a debt which is not yet due, he is not entitled to be paid from the proceeds. (Rather, if the bankrupt does not agree to pay the person immediately, the magistrate keeps this person’s share until the. debt is due (and then pays him).)
If one of the creditors has accepted an article of the bankrupt’s property as collateral from him for a debt, he is paid the amount owed to him from the sale of the collateral (and if there is money from its sale in excess of what was owed to him, it is distributed among the other creditors).
If one of the creditors finds the very piece of merchandise he sold to the bankrupt person, he may choose between selling it and dividing the profits with the other creditors, or cancelling the deal and taking back the piece of merchandise, provided there is nothing to prevent taking it back such as it being subject to preemption by a part owner (shuf’a), or the bankrupt person having made it collateral to another person, or the merchandise’s being mixed with merchandise better than it, or some similar objection.
The bankrupt person is permitted to keep a suitable set of clothes and enough food for himself and his dependents to suffice for the day on which his saleable property is divided up. (If the bankrupt is then earning enough to suffice himself and his dependents, he is left as is. If not, then he is supported by the Muslim common fund (bayt al-mal), like all poor people. If there is no common fund, he must be supported by all the Muslims.)
(Source: The reliance of the traveller, revised edition, Edited and Translated by Nuh Ha Mim Keller)
Comments
John Doe
23/3/2019Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.
John Doe
23/3/2019Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.
John Doe
23/3/2019Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.