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Is filing (and then getting it approved, meaning dissolving of all debts) Bankruptcy allowed in the Sharia.

Answered as per Hanafi Fiqh by Askimam.org

Dear Respected Mufti Sahab Assalaamu Alaikum Wa Rahmatullaahi Wa Barakatuhu This question is USA specific, here in the US one can declare bankruptcy under the US federal laws, which if approved absolves the person from all the debts that he had accumulated, the criteria for getting a bankruptcy approved by a court is not very strict, so most people who file for bankruptcy (most common is known as Chapter 7 bankruptcy, i believe) DO get it approved. Since I intend to file a Chapter 7 bankruptcy in the US court, my question is whether it is allowed in the Sharia or if I do get all my debt dissolved by the court, it won’t be counted as Haram to me. If it helps, my total debts are around USD $40,000. The figure IS high, but I can’t digest the idea that I consumed even a penny of haram, so if the Sharia says I have to pay back every penny of my debt, I will pay it back InshaAllah, regardless of how high the amount is, since its a matter of Halal or Haram. JazakAllah Khair for your efforts.

Answer

Respected Brother-in-Islam

Assalaamu Alaykum Wa Rahmatullaahi Wa Barakaatuhu

Nabi (Sallallaahu Alayhi Wasallam) said, ‘The best person is he who
adequately fulfils his debts.’ (Mishkaat). Nabi (Sallallaahu Alayhi
Wasallam) also states, ‘The procrastination (of the debtor) is oppression.’

In another Hadith, Rasulullah (Sallallaahu Alayhi Wasallam) mentioned, ‘The
greatest sin in the sight of Allah (after the major sins) is that a person
meets Allah Ta’ala after death and he has left unpaid debts which could be a
hinderance of his entrance into Jannah.’

In view of the abovementioned Ahaadith, it is not proper to declare
bankruptance in a situation when one is not insolvent.

and Allah Ta’ala Knows Best

Mufti Ebrahim Desai
FATWA DEPT.

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This answer was collected from Askimam.org, which is operated under the supervision of Mufti Ebrahim Desai from South Africa.

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