Book of Bankruptcy
Introduction
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Book of Bankruptcy

Anyone whose immediately-payable debts exceed his assets is placed under interdiction (ḥajr) at the request of the creditors; no interdiction is declared on the basis of deferred debts. If interdiction is imposed because of current debts, the deferred debts do not thereby fall due, according to the dominant view.

Where the debts equal the value of his property, and he earns a living from which he meets his expenses, no interdiction is imposed. If he lacks any income and supports himself out of his capital, the same ruling—no interdiction—holds, on the sounder opinion.

No interdiction is declared without a petition. Thus, if some creditors apply for it and the amount of an individual’s claim is sufficient to warrant interdiction, it is granted; otherwise it is not. On the stronger view, interdiction may also be imposed at the bankrupt’s own request.

Once interdiction is declared, the creditors’ rights attach to all of his property, and the judge is to have the interdiction publicly witnessed so that people will beware of dealing with him.

Should he, after interdiction, sell, gift, or manumit a slave, one view is that the disposition is suspended: if its value exceeds the debt it is upheld to that extent, otherwise it is void; the more authoritative position is that it is void outright. Accordingly, if he sells his property to his creditors in settlement of their claims, the sale is invalid on the sounder opinion.

If he conducts a salam sale (forward sale) or purchases on credit, the correct ruling is that the transaction is valid and the liability is established in his debt.

His marriage, divorce, khulʿ (mutual dissolution), exercise of retaliation (qiṣāṣ), and his waiving of his own rights all remain valid.

If he acknowledges ownership of a specific asset or a debt that had already fallen due before interdiction, the prevailing view is that such an acknowledgement is effective against the creditors. If, however, he dates the obligation to after the interdiction—whether by citing a later transaction or without specification—it is not accepted against them. Should he say that it arose from a criminal injury (jināya), his acknowledgement is accepted on the sounder view.

He may rescind a purchase for a defect if rescission is to his advantage.

The stronger opinion is that the interdiction extends to property subsequently acquired through hunting, a bequest, or, if we validate it, a purchase.

A seller who knew of the buyer’s interdiction has no right to rescind the sale and reclaim the very goods; if he was unaware, he may do so. If repossession proves impossible, he may not compete with the other creditors for the price.