Saturday, 5 January 2019

Debt Collection


The issue of unpaid debts and how to enforce payments has been around for as long as money has. Finding a system that is both moral and efficient can be elusive, and deciding what is considered moral can be complex.

Before we discuss what the Torah has to say about this, let's take a look at what happened historically when Torah laws were not implemented. We have a classic example in Tanach:

וְאִשָּׁה אַחַת מִנְּשֵׁי בְנֵי הַנְּבִיאִים צָעֲקָה אֶל אֱלִישָׁע לֵאמֹר עַבְדְּךָ אִישִׁי מֵת וְאַתָּה יָדַעְתָּ כִּי עַבְדְּךָ הָיָה יָרֵא אֶת יְיָ וְהַנֹּשֶׁה בָּא לָקַחַת אֶת שְׁנֵי יְלָדַי לוֹ לַעֲבָדִים.

(מלכים ב, ד, א)

One of the wives of the sons of the prophets cried to Elisha: "Your servant, my husband has died, you knew that your servant feared G-d. Now the creditor is coming to take my two children as slaves!"

)Melachim II, 4:1(

The continuation is the famous miracle that Elisha oversees, with the small amount of oil that the woman has increasing until she is able to use it to pay off the debt and live off the remainder. However, what would have happened without this miracle is appalling.[1]

I do not know how often this kind of thing happened under Jewish rule in the times of the Tanach, but I do know that in the world as a whole similar practice was common until not so long ago. In the UK, until 1869 debtors could be imprisoned indefinitely if they could not pay up (usually impossible after being imprisoned). While most countries abolished this around the same time, in Greece it was still possible to jail debt defaulters until 2008![2]

The other extreme would be to give free reign to borrowers without the means to pay up, allowing them the freedom to raise the funds in their own time. As far as I am aware this has never been tried, for obvious reasons. In such a situation, no-one in their right mind would lend money to anyone. The poor and those in need of cashflow would be major losers and the global economy would also crash (a 'credit crunch').

'Do not act as a creditor'

The Torah has rules to prevent both extremes, as well as less extreme behaviour. The Rambam summarises:

Anyone who pressurises a poor person (to repay a debt) in the knowledge that he doesn't have anything to pay back with violates a negative commandment, as it says, "Do not act as a creditor."[3] …. It is forbidden for a person to display himself to his debtor at a time that he knows that he doesn't have funds, even to pass in front of him without claiming his debt (and certainly not to claim it), so that he should not get scared or humiliated.

Just as it is forbidden for the lender to claim (knowing that the borrower cannot pay), it is also forbidden for the borrower to hold back someone else's money, telling him to come back another time, if he has the money. As it says, "Do not say to your fellow 'Go and return.'"[4] Similarly, it is forbidden to take a loan and spend it unnecessarily, leaving nothing for the creditor to collect from, even if the lender is a very wealthy man. One who does this is a wicked man, as it says, "A wicked man borrows and doesn't pay back."[5] The Chachamim instructed that your fellow's money should be as dear to you as your own.

Hilchos Malveh v'Loveh, 1:2-3

All of this relates to the obligations of an individual, although obviously if it is forbidden for the lender to put any amount of pressure on a borrower who doesn't have the funds, certainly no punishment will be administered to such a borrower by Beis Din. The questions start in cases where the ability of the borrower to pay is disputed, or the debt itself is disputed.

'Not to lock the door'

It is well known that the guiding rule of the Torah in all monetary disputes is that המוציא מחברו עליו הראיה, the onus of proof is on the claimant. In order to make sure that he has such proof, a lender is advised to keep written evidence. This is the only way to ensure that the borrower will not be able to deny the loan itself or claim that he repaid without supporting evidence.

Notwithstanding this option for the lender to keep written evidence, in no fewer than five places we find institutions of Chazal to make it easier for the lender to collect his debt.[6] It can be expensive to keep documentation (years ago because of the cost of writing materials, now because of various legal nuances), and even if the lender has a proof it can be hard to track the borrower down. All these institutions were made explicitly for the benefit of the (general) borrower, so that 'the door will not be locked in front of him' (by lenders afraid of losing their money).

None of these institutions help in a case where the borrower claims that he has no funds at all to pay from. In such a case Beis Din can investigate, and if they suspect that there is some hidden property to collect from there may be ways to uncover it. If they do not manage to prove it, the gemara provides no solution and the lender will have to wait.

However, in the times of the Geonim (between the seventh and tenth centuries) this issue caused frequent problems and a new institution was necessary. Practical limitations meant that the only thing that could be done was to make the borrower take an oath that he has nothing, did not hide anything in someone else's property and did not give a gift with a stipulation that it must be returned. Furthermore, anything that he will acquire will not be used to feed or provide for his family,[7] nor will he give it away to anyone.[8]

Nowadays, enforcing such an oath would rarely be effective. Not many dishonest people would be deterred by the severity of swearing falsely, and the result would mainly be an increase of transgression. Moreover, there is usually no necessity for such a solution. It is impossible for a debt defaulter to hide from everyone how much he has in his bank account, and by necessity there will always be some funds coming in. The bigger problem is organising and enforcing a practical payment schedule.


The Torah never absolves someone from debt due to bankruptcy. As the Rambam writes, "When the lender claims his debt, even if he is wealthy and the borrower is under pressure and preoccupied with sustenance, we do not take mercy in judgement. Rather, we collect the debt up until the last penny."[9]

This does not mean that we leave the borrower penniless. The Torah tells us that if one pledges a certain value to sacred funds but cannot afford it, he must be assessed and pays in accordance with what he has.[10] There is a dispute in the gemara about whether the same rules apply to a loan,[11] and the majority of poskim rule that they do.[12] Practically this means that we leave the borrower with basic needs, as well as the tools that he needs to continue to earn a living.[13] Whenever he obtains more funds, he must use them to continue paying off the debt.

Nowadays it is usually not necessary for Beis Din to make an assessment. When a debtor admits to his obligations but claims that he cannot pay up immediately, he is asked to suggest an amount to pay per month until the debt is paid in full. If the creditor is unhappy with this, usually a compromise can be arbitrated.

The problem comes with stubborn litigants, usually the ones who deny their obligation to pay fully or partially. If Beis Din rule against them they may be unwilling to discuss any payment schedule, feeling wronged. In this case, the only way Beis Din can enforce payment is by using debt enforcement agencies, empowered by the arbitration agreement signed by the litigants.

This brings up a potential halachic problem. The rules debt enforcement agencies follow (i.e. the law of the land) may not be as strict as the Torah's regulations, and they might violate the laws of what the borrower must be left with. Usually even a stubborn borrower will realise that it is not worth it for him to get into such a situation, but as enforcement ultimately relies on this route it is something that needs to be though out well.

One solution to this problem is dependent on the right that we have to 'change' the monetary laws of the Torah (see Nezikin- the part of the Torah that we can change). The Shulchan Aruch rules that a lender can stipulate with a borrower at the time of the loan that the usual rules will not apply,[14] and depending on the section of society this stipulation may be implicit based on the law of the land. However, we still need to question whether acting in such a way is appropriate on a moral level.

[1] This episode happened during the reign of Yehoram ben Achav, one of the immoral kings of Israel. According to Rashi, Yehoram himself was the creditor and the debt was interest that had accrued on a loan taken out by Ovadya in order to sustain the prophets that he hid in the cave from Yehoram's murderous father.
[3] Shemos 22:24
[4] Mishlei 3:28
[5] Tehilim 37:21
[6] See Kesuvos 88a (collection from the property of an absentee borrower), Gittin 49b (collection from average quality land as opposed to poor quality), Bava Basra 175b (collection from property already sold by the borrower), Sanhedrin 3a (relaxation of the need for ordained judges to enforce payment) and 32b (relaxation of the need to cross-examine witnesses to the loan).
[7] Although one is responsible to provide for his family, this responsibility cannot be carried out using funds that he is obligated to pay to others. If it is necessary, his family should be provided for by public tzedaka funds.
[8] See Shulchan Aruch, Choshen Mishpat 99 for details.
[9] Malveh v'Loveh 1:4
[10] Vayikra 27:8.
[11] See Bava Metsia 114a.
[12] See Shulchan Aruch, Choshen Mishpat 97:23.
[13] The details of this were set out by Chazal in Arachin 23b-24a.
[14] Choshen Mishpat 97:28

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