It is permissible for creditors to seize whatever they find with the debtor, except for those things without which living is not possible, such as the house, clothing, protection from cold, and the food for the debtor and his family.
Linguistic Explanation: A person who becomes bankrupt is called “Muflis.” Chapter أَفَلَسَ يُفْلِسُ (إفعال) means “no wealth remains.” To become bankrupt is called فَلسَ يُفَلِّسُ (تفعيل), meaning to declare bankrupt.
[Lisān al-‘Arab: 318/10, al-Munjid: p. 653]
Technical Definition: The ruler declares the debtor bankrupt and prevents him from disposing of his wealth.
[Subul al-Salam: 1160/3, Bidayat al-Mujtahid: 280/2, al-Qawānīn al-Fiqhiyyah: p. 318, al-Sharh al-Kabīr: 261/3, Mughni al-Muhtāj: 146/2, al-Mughni: 408/4, Kashf al-Qinā‘: 405/3]
Imam Shawkani (may Allah have mercy on him) states that a bankrupt is one whose debt exceeds his wealth.
[Nil al-Awtār: 267/3]
➊ It is narrated from Hazrat Abu Sa‘id Khudri (may Allah be pleased with him) that during the time of the Prophet’s mission, a man suffered a great loss in fruit trading, resulting in a heavy debt burden until he became bankrupt. The Messenger of Allah (peace be upon him) said:
تصدقوا عليه
“Give charity on his behalf.”
People gave charity for him, but it was not enough to pay off the debt. Then the Prophet (peace be upon him) told his creditors:
خذوا ما وجدتم وليس لكم إلا ذلك
“Take whatever you find with him; beyond that, you have no right.”
[Muslim: 1556, Kitāb al-Masāqāt: Chapter on the recommendation of waiving debt]
(Shawkani) From this hadith, it is deduced that when a bankrupt has less wealth than the known debt repayment amount, it is obligatory for him to hand over all his wealth (except essential items) to the creditors, and beyond that, nothing is required of him. The apparent meaning of the hadith also indicates that even if he becomes wealthy later, the remaining debt will be waived.
[Nil al-Awtār: 628/3]
The restriction on essential items is because the hadith does not mention that the bankrupt’s clothes were taken away, or that he was expelled from his home, or left with his family in a state where they lacked necessary provisions.
[Al-Rawdah al-Nadiyyah: 516/2, Talkhīs al-Habīr: 37/3]
Whoever finds his exact property with the bankrupt is more entitled to it.
➊ It is narrated from Hazrat Samrah (may Allah be pleased with him) that the Messenger of Allah (peace be upon him) said:
من وجد متاعه عند مفلس بعينه فهو أحق به
“Whoever finds his exact property with the bankrupt is more entitled to it.”
[Weak: Da‘if Abu Dawood: 1758, Kitāb al-Buyū‘: Chapter on a man finding his property with another, Abu Dawood: 3531, Ahmad: 10/5]
Although this narration is weak, subsequent authentic hadiths support it.
➋ It is narrated from Hazrat Abu Hurairah (may Allah be pleased with him) that the Messenger of Allah (peace be upon him) said:
من أدرك مـالـه بـعيـنـه عند رجل أفلس فهو أحق به من غيره
“Whoever finds his exact property with the bankrupt is more entitled to it than others.”
[Bukhari: 2402, Kitāb al-Istiqrāḍ: Chapter on finding one’s property with a bankrupt in sale, loan, and deposit, Muwatta: 678/2, Muslim: 1559, Abu Dawood: 3519, Tirmidhi: 1262, Nasa’i: 311/7, Ibn Majah: 2360, Darimi: 262/2, Darqutni: 29/3, Ibn al-Jarud: 630, Bayhaqi: 33/6, al-Hilyah li Abi Na‘im: 361/5, Sharh al-Sunnah: 339/4]
➌ In one narration, the wording is:
أيما رجل أفلس فوجد رجل عنده ماله ولم يكن اقتضى من ماله شيئا فهو له
“Whoever becomes bankrupt and the creditor finds his property with him but has not yet received any payment, then it belongs to him.”
[Ahmad: 228/2 – 258]
➍ In an authentic narration in Sahih Muslim, it is stated:
قال فى الرجل الذى بعدم إذا وجد عنده المتاع ولم يفرقه إنه لصاحبه الذى باعه
“The Prophet (peace be upon him) said regarding a needy person that if he finds the goods without change, then they belong to the seller-owner.”
[Muslim: 1559, Kitāb al-Masāqāt: Chapter on who finds what he sold with the buyer and the seller becomes bankrupt, Nasa’i: 311/7]
➎ Hazrat Abu Bakr bin Abdul Rahman (a Tabi‘i) narrates similarly:
وإن مات المشترى فصاحب المتاع أسوة الغرماء
“If the buyer dies, then the owner of the goods is equal to other creditors.”
[Sahih: Irwā’ al-Ghalīl: 1442, Abu Dawood: 3520, Kitāb al-Buyū‘: Chapter on a man becoming bankrupt and finding his goods with another, Muwatta: 678/2, Ibn Abd al-Barr: 405/8]
(Shafi‘i and majority) If the seller finds his exact goods with the bankrupt, he is more entitled to them.
(Hanafis) The seller is not more entitled even if he finds his exact goods with the bankrupt.
[Al-Um: 229/3, Al-Hawi: 273/6, Al-Kafi: p. 417, Hashiyat al-Dusuqi: 290/3, Al-Mughni: 538/6, Kashf al-Qinā‘: 425/3]
Note that the authentic hadiths mentioned earlier refute the Hanafi position.
[For more details see: Nil al-Awtār: 630/3, Al-Rawdah al-Nadiyyah: 517/2]
If the seller has received some payment from the buyer, then the seller is not more entitled to the goods but is equal to the other creditors.
(Majority) hold this view.
(Shafi‘i) Even if the seller has received some payment, he is still more entitled to the goods.
❀ Imam San‘ani and Imam Shawkani state that from the word بعينه, this issue is derived that when the lender or seller does not find his property in the same condition as it was given, and some attribute has changed or there is some deficiency or excess, then the owner is not more entitled but is equal to all creditors.
[Subul al-Salam: 1163/3, Nil al-Awtār: 629/3]
If the buyer dies without paying the price of the goods:
(Shawkani) If the buyer dies without paying the price, the seller is equal to other creditors.
(Malik and Ahmad) hold the same view.
(Shafi‘i) In this case, the seller is still more entitled to the goods.
(Ibn Hajar) holds the same view.
[Fath al-Bari: 346/5]
Their evidence is the hadith narrated from Hazrat Abu Hurairah (may Allah be pleased with him):
من أفلس أو مات فوجد الرجل متاعه بعينه فهو أحق به
“Whoever becomes bankrupt or dies and a person finds his exact property with him, then he is more entitled to it.”
But this narration is weak.
[Weak: Da‘if Abu Dawood: 757, Kitāb al-Buyū‘: Chapter on a man becoming bankrupt and finding his goods with him, Irwā’ al-Ghalīl: 1442, Al-Mishkāt: 2914, Abu Dawood: 3523, Ibn Majah: 2360, Ibn al-Jarud: 634, Darqutni: 29/3, Hakim: 50/2, Bayhaqi: 46/6]
❀ It is permissible for the owner of the goods to retrieve his property without the ruler’s order.
[Fath al-Bari: 346/5]
❀ Aswat al-Khuramā’: Aswat means equal or equivalent, and Ghuramā’ is the plural of Gharim, meaning creditors. That is, the person will receive an equal share with the remaining creditors.
When the bankrupt’s total wealth is less than the full debt repayment, whatever is available will be divided among all creditors, and once his bankruptcy is established, it is not correct to imprison him.
The evidence is the hadith containing the words:
فصاحب المتاع أسوة الغرماء
[Sahih: Irwā’ al-Ghalīl: 1442, Abu Dawood: 3520, Kitāb al-Buyū‘: Chapter on a man becoming bankrupt and finding his goods with another, Muwatta: 678/2, Ibn Abd al-Barr: 405/8]
Allah Almighty says:
وَإِن كَانَ ذُو عُسْرَةٍ فَنَظِرَةٌ إِلَىٰ مَيْسَرَةٍ [Al-Baqarah: 280]
“If he is in hardship, then grant him time until it is easy for him.”
Delaying a wealthy person’s repayment is oppression that humiliates him and makes him deserving of punishment.
➊ It is narrated from Hazrat Abu Hurairah (may Allah be pleased with him) that the Messenger of Allah (peace be upon him) said:
والظلم مطل الغنى
“Delaying a wealthy person’s repayment is oppression.”
[Sahih: Sahih Nasa’i: 4371, Kitāb al-Buyū‘: Chapter on delaying the rich, Nasa’i: 4692]
➋ Hazrat Amr bin Shurayd narrates from his father that the Messenger of Allah (peace be upon him) said:
لـى الــواجــد يــحــل عـرضـه و عقوبته
“Delaying a wealthy person’s repayment humiliates him and causes punishment.”
[Hasan: Sahih Nasa’i: 4372, Kitāb al-Buyū‘: Chapter on delaying the rich, Nasa’i: 4693, Abu Dawood: 3628, Kitāb al-Qada’: Chapter on debt and whether imprisonment is allowed]
❀ If it is unknown whether the person is bankrupt or wealthy, an investigation should be conducted. If he is proven wealthy, then his wealth should be extracted through imprisonment and punishment; if bankrupt, he should be granted respite until ease.
[Al-Rawdah al-Nadiyyah: 519/2]
It is permissible for the ruler of the time to prevent the bankrupt from disposing of his wealth and to sell his wealth to pay off debts.
Hazrat Ka‘b bin Malik (may Allah be pleased with him) said:
أن النبى صلى الله عليه وسلم حجر على معاذ وباع ماله فى دينه
“The Prophet (peace be upon him) prevented Hazrat Mu‘adh (may Allah be pleased with him) from disposing of his wealth and then sold it to pay off debts.”
[Weak: Irwā’ al-Ghalīl: 1435, Hakim: 58/2, Dar Qutni: 523, Bayhaqi: 48/6, Ibn Asakir in Tarikh Dimashq: 1/315/16, Tabarani Awsat: 1/146/1, Al-Du‘afā’ li al-‘Aqili: p. 23; Imam Hakim declared it authentic on the condition of the two Shaykhs, and Imam Dhahabi agreed with him.]
(Abu Hanifa) It is neither permissible to prevent the debtor from disposing of his wealth nor to sell it.
[For more details on this issue see: Al-Um: 242/3, Fath al-Wahhab: 201/1, Bada’i‘ al-Sanā’i‘: 173/7, Al-Hidayah: 104/3, Al-Ikhtiyār: 98/2, Al-Kafi: p. 418, Al-Kharshi: 669/5, Al-Mughni: 585/6, Kashf al-Qinā‘: 420/3, Tabyin al-Haqā’iq: 199/5]
Note that it is also established from the action of Hazrat Umar (may Allah be pleased with him) that he prevented the debtor from disposing of his wealth and distributed it among the creditors.
[Muwatta: 770/2, Bayhaqi: 49/6; its chain is disconnected as Hafiz Ibn Hajar stated. Talkhīs al-Habīr: 91/3; Imam Darqutni also mentioned it as received. Darqutni in Al-‘Adhl: 147/2]
(Shawkani) states that denial of this action from any companion is not proven.
[Nil al-Awtār: 632/3]
Similarly, the ruler of the time can also impose restrictions on a wasteful and imprudent person.
➊ Allah Almighty says:
وَلَا تُؤْتُوا السُّفَهَاءَ أَمْوَالَكُمُ [An-Nisā’: 5]
“Do not give the foolish your property.”
In Tafsir Kashaf it is stated:
السفهاء المبذرون
“The fools mentioned in the verse are those who waste wealth in inappropriate places. The address in the verse is to their guardians to impose restrictions on their wealth.”
[Tafsir al-Kashaf: 471/1]
➋ Hazrat Urwah bin Zubair (may Allah be pleased with him) narrates that Abdullah bin Ja‘far (may Allah be pleased with him) bought something, and Hazrat Ali (may Allah be pleased with him) said, “I will definitely impose a restriction on you from Hazrat Uthman (may Allah be pleased with him).” Abdullah bin Ja‘far informed Zubair (may Allah be pleased with him), who said, “I am your partner in trade.” Then Hazrat Ali went to Hazrat Uthman and said, “Come, impose a restriction on him.” Zubair said, “I am his partner.” Hazrat Uthman said:
أحجر على رجل شريكه الزبير؟
“Should I impose a restriction on a person whose partner is Zubair?”
[Sahih: Irwā’ al-Ghalīl: 1449, Musnad Shafi‘i: 1229, Bayhaqi: 61/6]
➌ A man freed his slave in such a way that the slave would be freed after his death, although he had no other wealth. The Prophet (peace be upon him) rejected this and sold the slave to Na‘im bin Nuham.
[Bukhari: 2415, Kitāb al-Khusūmāt: Chapter on rejecting the affairs of the foolish and mentally weak]
Before narrating this hadith, Imam Bukhari established this chapter:
من رد أمر السفيه والضعيف العقل وإن لم يكن حجر عليه الإمام
“The affairs of a foolish or mentally weak person will be rejected even if the ruler has not imposed a restriction on him.”
(Ibn Hajar) states that the wisdom behind imposing financial restrictions on the foolish is to protect wealth because wealth is made for benefit, not for loss.
[Fath al-Bari: 350/5]
❀ Jurists differ regarding imposing restrictions on an adult person.
(Majority) say it is permissible to impose restrictions on an adult.
(Abu Hanifa) says it is not permissible.
[Fath al-Bari: 350/5, Al-Um: 251/3, Rawdat al-Talibin: 363/3, Bada’i‘ al-Sanā’i‘: 169/7, Al-Ikhtiyār: 96/2, Al-Kafi: p. 423, Al-Mughni: 593/6, Kashf al-Qinā‘: 417/3, Bidayat al-Mujtahid: 231/2, Nil al-Awtār: 633/3]
(Tahawi) states that among the companions and followers, except for Ibrahim and Ibn Sirin, he did not see anyone who forbade imposing restrictions on an adult.
[Ibn Abi Shaybah: 362/4]
(Preferred) It is permissible to impose restrictions on an adult because an adult can also be foolish or mentally weak.
[Nil al-Awtār: 633/3]
