Book of Insolvency

Insolvency means having no property. Declaring a man insolvent means divesting him of his property for the benefit of his creditors. A person declared insolvent is one against whom a judgment of insolvency has been issued, whereas an insolvent person is someone who has no property.

It is reported that the Prophet ﷺ said, “Do you know who among my community is bankrupt?” They replied, “The bankrupt person is someone who has no dirhams.” He said, “The bankrupt person is someone who comes on the Day of Resurrection with prayer, fasting and charity, but has wronged this person, consumed that person’s wealth, struck another and insulted another. He will be seated, and compensation will be taken from his good deeds for this person, and from his good deeds for that person. If his good deeds are exhausted before they suffice to redress his sins and wrongs, some of those people’s sins will be taken and cast upon him, and then he will be cast into the Fire.”

It is reported that Abū Sa‘īd al-Khudrī said: “During the time of the Messenger of Allah ﷺ, a man suffered a loss on some fruit he had purchased, and his debts became considerable. The Messenger of Allah ﷺ said, ‘Give him charity.’ People gave him charity, but it was not enough to pay his debts in full. The Messenger of Allah ﷺ then said, ‘Take whatever you find; you are entitled to nothing beyond that.’”

This man was Mu‘ādh ibn Jabal. The Prophet ﷺ did no more for his creditors than divest him of his property in their favour; he did not order that he be sold or imprisoned. The jurists of the major centres hold this view: an insolvent person is neither hired out to repay his debts nor imprisoned on account of them, for Allah, Mighty and Majestic, says: