Writing off the debts due from those who have fallen into bankruptcy
Q: One of the topics on which we still do not have a clear Islamic legal opinion is
writing off debts owed to a company by others as a result of several transactions.
For example:1- Those who have fallen into bankruptcy.2- Embezzlers who run away from
before being exposed. The company only could demand its rights back through the international police or through filing law suits against them before the courts of their countries which is most often futile.3- Those who die without leaving a sufficient bequest to pay the debts they owe to the company.4- When the debt is too little and the charges of collecting it exceed the loan itself.Banks go to great lengths in collecting debts from the debtors, in some cases it has become a custom to write off those bad debts. (Part No. 11; Page No. 159) Al Rajhi Banking and Investment Corporation is one of the joint-stock financial companies, which is headed by a board of directors appointed by the Ordinary General Assembly of Shareholders. It is not of the authority of that board to donate money from the company to others, even though this board is authorized to discharge the debtors who owe money to the company according to its constituent assembly.It is very difficult for all of the shareholders to attend as the owners themselves change daily according to buying and selling other shares of the market in many operations. I wish for Your Eminence to clarify those issues for us? Is it permissible for the board of directors of this company to write off those bad debts?
Having examined the Fatwa request and perused the system of the company related to this department, the Committee replied that it is not permissible for the board of directors to write off those bad debts of those mentioned cases. Rather, they have to exert more efforts to collect the whole legal rights of the company from the insolvent, the embezzlers and others. Allah (Glorified and Exalted be He) says:
Verily, Allâh commands that you should render back the trusts to those to whom they are due
He (Glorified be He) says about the attributes of the Believers:
Those who are faithfully true to their Amanât (all the duties which Allâh has ordained, honesty, moral responsibility and trusts) and to their covenants;
He (Part No. 11; Page No. 160) (Glorified and Exalted be He) also says:
O you who believe! Betray not Allâh and His Messenger, nor betray knowingly your Amânât (things entrusted to you, and all the duties which Allâh has ordained for you).
So keep your duty to Allâh and fear Him as much as you can
The Prophet (peace be upon him) said:
The hand that takes is responsible for what it has taken until it returns it.
May Allah grant us success. May peace and blessings be upon our Prophet Muhammad, his family, and Companions.