Bankruptcy

1446 Words3 Pages

Bankruptcy, today, is a very common thing among companies and individuals alike. Sadly enough there were as many bankruptcy cases filed in federal courts, as there were all other cases. The American bankruptcy law allows people to avoid paying their debts, by offering the debtors a discharge, which eliminates all their legal responsibilities. However, bankruptcy is a controversial issue amongst religious members of the Jewish population, for one must question whether it is morally correct to avoid paying a dept by filing for bankruptcy. According to the torah, a debt is an obligation that must be fulfilled. Consequently, if a bankruptcy discharge is invoked, under the strictness of Jewish law, one is still required to pay back the money no matter how long it may take him. According to Bais Din the debtor must hand over his property, with a few exclusions, to the creditor, and if this does not cover what he owes the creditor, then every time the debtor acquires new assets, he pays the creditor until he no longer owes him anything.
According to Halacha there is a way for the debtor to be discharged. This is through “Yeush”. This term denotes that this is the point where a person no longer believes he will recover the object he has lost. In this case, the creditor loses hope of being paid back the money the debtor owes him. Therefore the debtor is free from his obligation to pay the creditor. According to some poskim, yeush does not discharge the debtor, unless the circumstances, such as where the debtors fields are ruined by a flood, the debtor is in, makes the creditor lose hope of ever being paid back According to others, yeush can discharge the debt if the debtor becomes impoverished only and not because he didn’t want to pay back his debt.
If the debtor does not become discharged through the creditors yeush, there is one of two ways to obtain a bankruptcy discharge through halacha. The first way is through liquidation. This is where the debtor hands over all his property, with keeping some exempt property, and this covers his debt to the creditors and he is now free of his obligation to pay them. The second way is through reorganization. The debtor makes a plan to repay his creditors over a number of years, with a minimum payment required for each year. When he has finished with these payments,...

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...t that the halacha is in accordance with one aspect of the debate, this being called “kim li”. Now the plaintiff, the creditor, can only win if he proves his case according to the view chosen by the defendant. In this case of a “kim li”, bais din has to determine whether dina d’malchusa dina applies to a bankruptcy discharge. As mentioned above, the Rema states that it does, and therefore the defendant may win this case and be free of debt. However, there is a question now as to whether the defendant should pay the creditor because of religious obligation. In a regular bankruptcy discharge, the debtor is free of all his debt and thus it may assumed in this case that the defendant is free from debt because of the use of “kim li”.
Working through secular law, unfortunately, may be the only way to clear debts owed between many. Although it is not the preferred way to do business, especially between religious Jews, it is the way the world works and it makes it easier to get rid of the debt between Jews and non-Jews. This paper is a very revised version of bankruptcy and the Halacha perspective, but I hope it provides all the information that is necessary.

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