What should be done with extra money received over and above one’s debt when a collateral is sold?
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Any surplus proceeds in excess of an outstanding debt realised from the sale of a collaterised asset must be returned to the debtor.
The Fiqh (jurisprudence of the answer):
Rahn (collateral) is a contract in which a creditor mitigates risk of default by taking a collateral in the form of a pledge against an asset. In the event of default, the outstanding claim is taken from the sale of the collateralised asset. The creditor is only entitled to the amount contracted. He does not have any entitlement to the surplus from the sale.
And Allah Ta’ālā Alone Knows Best
Mufti Faraz Adam,
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