Bankruptcy - Is it Permissible in Islam to Declare Oneself Bankrupt if Unable to Repay Loans?
  • Question:

    I have a substantial amount of debt due to unemployment of my spouse during the past several years. I have actually decided to divorce my spouse because of his lack to fulfil his duty to provide for me and our three children, among other issues. I have borrowed extensively from my father over the years of my marriage. This credit debt is in my name and I can't pay it back. My spouse refuses to pay for it. I am not currently working as my son has a disability and requires my attention while he is not in school.

    I want to declare bankruptcy according to the laws of the USA. Is this permissible in Islam? How will it impact my afterlife?

    Thank you for your question.

    In general, du‘ā’ (supplication) is a praise worthy act encouraged by Allāh and His Messenger (peace and blessings upon him).

    We sympathise with your difficult circumstance and pray for the best outcome. May Allāh facilitate understanding, comfort and relief for you and your family.

    In response to your question, please note that declaring bankruptcy or insolvency is permissible, provided you follow all legal procedures to do so according to the laws of your country without any form of lying or fraudulent claim.

    In terms of the impact on one’s hereafter, it should be noted that if one owes money to another, they are responsible for that. This can have an impact on one’s next life, in terms of sin, especially if one had the money or was able to come up with the money to settle debts, yet did not do so.

    We continue to pray for your success.

    And Allah knows best.

    Answered by Shaykh Yusuf Badat
    Hadith of the Day Imam
    Imam of the Islamic Foundation of Toronto and Director of Mathabah Institute
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