What does Islam say about debt?

Why debt carries such weight

The scholars ground this in the Qur'an's command that a lender receive back only the principal — "so that you neither wrong nor are wronged" — and in the Prophet's ﷺ own conduct. Ibn 'Uthaymeen draws out three consequences from the hadith on the debtor's soul being suspended: it establishes the reality of the punishment of the grave, it shows how urgent repayment is during one's lifetime, and it places the debt ahead of the heirs' shares, since Allah says the estate is distributed "after any bequest or debt."

"The soul of the believer is suspended by his debt until it is paid off."— Sunan al-Tirmidhi 1078, from Abu Hurayrah

He also notes that the Prophet ﷺ said "the debt of Allah is more deserving of being paid," so the term covers both what is owed to people and what is owed to Allah — expiations, vows, and the like.

Repaying a debt you cannot trace

Al-Albani was asked about a man who bought cloth, owed the seller a balance, then travelled and could not reach him. His answer sets out the practical path:

• Pay if you can reach him: it is obligatory to deliver the right to its owner by every means available.
• If you cannot: give the amount in charity on the owner's behalf, intending it for him.
• If you meet him later: hand him his right, and the charity returns to you.

When the debtor is in hardship

Ibn Qudamah sets out the Hanbali treatment in Bab Ahkam al-Dayn. A debt that has fallen due on someone in genuine hardship must be given time. If he claims hardship he swears an oath and is released — unless he is known to have wealth, in which case only clear proof is accepted. If he is able to pay and refuses, he is detained until he pays.

Where his wealth cannot cover all his debts and the creditors ask the judge to freeze his assets, the judge must respond. Once frozen, his disposal of his property is void and his acknowledgement of further debts is not accepted. The judge then pays the creditors in a set order:

1. Injury claims against his slaves — the victim of a slave's offence receives the lesser of the compensation or the slave's value.
2. Secured creditors — each receives the lesser of his debt or the sale price of the pledge, and joins the other creditors for the remainder.
3. The seller of identifiable goods still in the debtor's possession, untouched and unpaid for — he may take them back, on the strength of the hadith: "Whoever finds his exact property with a man who has gone bankrupt, he has more right to it than anyone else."
4. The remaining estate is divided among the creditors in proportion to their debts.

The debtor's own maintenance, and that of those he supports, is paid from his wealth until the distribution is complete.

Freezing assets: a real disagreement

Al-Shawkani records that the scholars differed on whether a judge may freeze a debtor's property and sell it. The majority position he reports — held by al-Shafi'i, Malik, Abu Yusuf, Muhammad, and others — is that it is permitted, on the strength of the Prophet's ﷺ freezing of Mu'adh's assets, and they restrict it to when the creditors request it. Abu Hanifah, Zayd ibn Ali and al-Nasir held that freezing and sale are not permitted; the judge instead detains the debtor until he pays, arguing from "the wealth of a Muslim man is not lawful." Al-Shawkani answers that this general prohibition is specified by the hadith of Mu'adh.

Conditions attached to a loan

Al-Shanqiti (Hanbali) divides the conditions a lender may attach into three categories, and the governing principle is that the lender may not take any increase over what he lent:

"And if you repent, you shall have your principal, neither wronging nor being wronged."— Qur'an 2:279

• Permitted conditions: those that secure the lender's right without adding value.
• Forbidden conditions: any condition bringing the lender a benefit — a cash increase, or a service such as renting his shop or buying his car at a discount. The Prophet ﷺ forbade "a sale and a loan" together. A bank deposit that must stay for a fixed term in return for a percentage falls under the same prohibition, as a loan that brings the lender a benefit.
• Disputed conditions: those the scholars differ over.

Paying a debtor's debt from zakat

Ibn Baz was asked whether zakat funds may be used to clear a debtor's obligation. He held that there is no harm in it, because the debtor falls under the category of al-gharimun (those in debt), which the Qur'an names as one of the eight recipients of zakat. Ibn 'Uthaymeen adds a condition: the reason for the debt is examined. If it arose from something forbidden, the debtor is told to repent and his debt is paid; if it arose from something permissible, it may be paid from zakat without objection.

Key takeaways

• Repay your debts, and do not delay: the scholars describe the debt as suspending a person until it is settled, and the heirs must settle it before taking their shares.
• If you cannot reach your creditor, give the amount in charity on his behalf; if you later meet him, hand him his right and the charity returns to you.
• A debtor in hardship must be given time, and a debtor who can pay but refuses may be detained.
• No increase may be attached to a loan — whether in cash or in services — as this is the essence of what the Qur'an prohibits.
• Zakat may be used to clear a genuine debt, and the Hanbali school permits a judge to freeze and sell a debtor's assets to satisfy creditors, though Abu Hanifah held otherwise.

Further reading

• Ibn Qudamah, al-Mughni — the chapter on the rulings of debt
• Al-Shawkani, Nayl al-Awtar — the chapter on freezing the debtor and selling his property
• Ibn 'Uthaymeen, Liqa' al-Bab al-Maftuh

And Allah knows best.