Creditor’s Rights and Debt Management

Islam has given rights and duties to every individual whether it be a parent, leader, judge, creditor, debtor or teacher. Similarly, creditor’s rights have been given great importance and significance in Islam.

Rasullullah sallallahu alayhi wasallam greatly emphasized the importance of the creditor’s rights. Consider the following narrations:

1. It has been reported from Muhammad bin Abdillah bin Jahsh radhiyallahu anhu who said, “We were sitting in the courtyard of the Musjid where the Janazas used to be placed and Rasulullah sallallahu alayhi wasallam  was sitting amongst us when he suddenly lifted his gaze towards the sky staring. Thereafter, he turned his gaze and placed his hand upon his forehead stating, ‘Subhanallah, Subhanallah, what severity has descended!’ We remained silent for that day and night but we only witnessed tranquility until the morning.” Muhammad (the narrator) then stated, “Thus I asked Rasulullah sallallahu alayhi wasallam ‘What is the severity that descended?’ He sallallahu alayhi wasallam said, ‘It was in regards to debt. By the Being in whose grasp lies the life of Muhammad sallallahu alayhi wasallam if a person is martyred in the path of Allah and then brought back to life and martyred in the path of Allah and then brought back to life and martyred again in the path of Allah and then brought back to life and he had a debt upon him, he will not enter Jannah until he repays his debt!” (Musnad Ahmad v. 5 pg. 289, Muasasa Qurtuba)

 

2. Abu Sa’eed Khudri radiallahu anhu reported that, “A deceased person was brought before Rasulullah sallallahu alayhi wasallam so his Janazah Salah may be performed. He sallallahu alayhi wasallam asked, ‘Is there a debt upon your companion?’ They replied, ‘Yes.’ He sallallahu alayhi wasallamsaid, ‘Has he left behind any means of repayment?’ They replied, ‘No.’ He sallallahu alayhi wasallam then said, ‘You perform Janazah Salah upon your companion.’ Ali ibn Abi Talib radhiyallahu anhu said, ‘Oh Rasulullah sallallahu alayhi wasallam, I undertake the responsibility of repaying his debt.’ Thereafter Rasulullah sallallahu alayhi wasallam came forward and performed the Salah.” (Bayhaqi Sunan Kubra v. 6 pg. 73, Majlis Da’ira al-Ma’arif al-Nizamiya)

3. Sa’d bin Al-Atwal radhiyallahu anhu once enquired from Rasullullah sallallahu alayhi wasallam, “My brother passed away and left behind 300 Dinars and some small children as well thus I intend to spend some of the money upon them. Rasulullah sallallahu alayhi wasallam said, ‘Your brother is being held back on account of his debt thus fulfill it on his behalf.’ Sa’d then said, ‘I went and fulfilled it for him and there only remained one woman who was claiming two Dinars for which she had no proof. He sallallahu alayhi wasallam said, ‘Give it to her for verily it is Sadaqah.” (Musnad Ahmad v. 4 pg. 136, Muasasa Qurtuba)

4. Rasulullah sallallahu alayhi wasallam has stated, “The undue delay of a rich person (in paying his debts) is an oppression” (Saheeh al- Bukhari, # 2287, Vol.3, Pg.94, Dar Tawq al- Najah)

We all strive to attain Barakah in our life. Barakah in one’s wealth will be achieved by doing our transactions according to the Shariah laws of Islamic finance and commerce. Barakah is “Divine blessing in one’s earning from the side of Allah (Subhanahu Wa Ta’ala).

Many factors deprive our wealth and life of Barakah. One of the major factors is not fulfilling the rights of our creditors.

It is unfortunate that many of us delay in paying our debts despite having the means to do so.  We duck and dive and claim not having the means to pay our debts. Yet, we go for Umrah with the family, buy new cars, open up new businesses and buy holiday flats. This is Zulm and oppression to the creditors. Allah (Subhanahu Wa Ta’ala) will hold us liable for all these actions.

We will begin to attain Barakah in our wealth only when we examine and manage our debt portfolio in accordance with the Islamic laws and principles of finance and business ethics.

Hereunder are some basic debt management tops to help us fulfill the rights of creditors and aid us in keeping our debts in order as well:

  • A person should avoid taking a loan at all costs. Debt is a burden which has the potential to torment one in his life time, and his heirs after death.
  • When deciding to take up a loan, one should ascertain the needs and try to fulfill these needs through any surplus money one has. If one has no choice but to take the loan then only borrow an amount required to fulfill those needs.
  • Evaluate and keep a record of one’s assets. This value helps in knowing the limits of one’s financial worth.
  • In order to keep afloat the credit burden, set a limit of debt-to-asset ratio. A comfortable limit is usually 50%. This means one should not undertake a debt more than the 50% worth of his assets. This way, in the worst case scenario, one can still sell off the assets to cover for the debt.
  • Keep a rigorous account of financial matters. It is our nature to forget our debts. Hence writing it down will help in tracking the rights of creditors. Constantly review this journal.
  • Avoid all interest bearing transaction. It will ruin the spiritual worth of all the assets and drag a person into poverty.
  • If one has a credit card then assure to pay all the payments in time to avoid any interest. If one does not need a credit card, then one should not keep one.
  • Undertake a loan with an honest intention of paying off. Hoodwinking a creditor may earn  some pennies and nickels, but at the cost of displeasure of Allah.
  • The creditor has the right to demand the loaned amount, even if it means he has to treat the debtor harshly. So one should not put oneself in a position where the honor is jeopardized. Pay out or make alternative arrangements.
  • If one’s repayment schedule is being disturbed due to the expenses of the lifestyle one has, then do not be ashamed to lower the lifestyle and live more simply. It is worth it!
  • Continue a close watch on all related materials on debt management, debt consolidation and debt hedging to avoid any debt crisis.
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