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ISLAMIC MEDICAL EDUCATION RESOURCES 04

28.2 PERSONAL LOANS, Quruudh

By Professor Omar Hasan Kasule Sr.

28.2.1 CONDITIONS

Debts must be written and witnessed. If it is not possible to write, a collateral can be taken. A debtor is obliged to pay back. Delay of debt payment by those with ability to pay is a punishable offence. A debtor who has the means to pay and refuses to settle his debt can be imprisoned or beaten to force him to fulfil his obligations. The property of the debtor can be seized to settle outstanding claims. No gifts can be accepted from a debtor because that may be a form of riba. If the value of the currency increases or decreases, the debt is paid back in the same currency in which it was borrowed with no adjustment for inflation or deflation. If the debt was taken in a currency that is subsequently abolished by the government, payment is due in the amount of the new currency equivalent to the old currency on the day of the transaction. A date whose payment is due at a future debt after the death of the debtor remains a liability on the inheritors.

 

28.2.2 COLLATERAL, rahn

Rahn ensures that the debtor will endeavour to pay back. It is taken if the debtor fails to pay. Rahn is needed especially if the debt is not written down in an agreement. The contract for rahn must be written clearly to avoid disputes between the raahin and murtahin. The contract must make it clear that this is a debt with rahn and not a sale. Taking delivery is a condition for validity of the rahn as Allah says in the Qur’an ‘rahn maqbuudhat’ however in a situation of difficulty in which physical delivery and reception are not possible this condition may be ignored. The rahn may be material goods, animals, land, plants, or a house. If the rahn is a house the debtor is not allowed to stay in it without the permission of the creditor. Anything that is legal to sell can be used as rahn. The holder of the rahn cannot benefit from it in any way. Any benefits that accrue to him is deducted from the amount of the debt. Any sale of a rahn is faasid. If the rahn is destroyed due to negligence of the holder there is no refund, la dhamaan. If however it is spoiled due to negligence then it has to be refunded. The rahn is sold if the term of the debt passes without payment.  The rahn can only be sold by the judge and in the presence of witnesses.

 

28.2.3 GUARANTEE

A debtor could get another person who can vouchsafe for his honesty and ability to pay to act as guarantor. It is permissible to guarantee an unknown person, yajuuz dhamaan al majhuul as in. The guarantor of a debt is liable to pay if the original debtor fails to fulfil his obligations.

 

28.2.4 TRANSFER OF DEBTS, hawala

It is permitted for a debtor to transfer the responsibility of paying the debt to another person. Transfer of a debt to a rich person is irrevocable. Transfer to a poor person may be cancelled and the liability of the original debtor is maintained. Transfer of a deceased's debt is irrevocable. It is also possible for the creditor to transfer the right of collecting the debt to someone else.

 

28.2.5 BANKRUPTCHY

A debtor becomes bankrupt when his assets are less than the liabilities. Creditors can take back property from a bankrupt debtor. They take whatever they find of the debtor's property. If a creditor finds his property, he takes it back unless it has increased in value. In case of a generalized economic collapse in the community and not an isolated individual failure, the property of the bankrupt is not sold because his condition may improve. Financial support, nafaqat, on the self and the family has precedence over debt payment. Settling a debt has precedence over performing hajj. A bankrupt cannot give a rahn without the permission of the creditors. After sale of the bankrupt’s property, any restrictions on him are lifted. The property of a bankrupt person is sold by the judge to settle his debts. The following are the only items left with the bankrupt: a house, what he uses for trade if he is a trader, and tools if he is a craftsman. However these may also be taken if they were bought using loan money that led to the bankruptchy. When the property of the bankrupt is sold, the wages of laborers are settled before the debts of creditors. When all the property of the bankrupt is sold, he has no more debt liability even if the proceeds of the sale did not cover the whole amount owed.

(c) Professor Omar Hasan Kasule Sr. 2004