Salamu alaykum He took a haram loan from the bank. The bank suggested he take income insurance to cover his loan if he lost his job. He paid for the insurance to cover it. He lost his job and couldn’t repay. But the bank didnt cover him via insurance as agreed. Many banks in his country were fined by the govt for this insurance matter because of their deception to customers. The bank defaulted him and sold his debt to a agency. The agency demanded it all plus riba. He couldn’t pay it back. By Law in his country debts to such agencies are whiped off by statute of limitations 6 years if they cant collect by then the debt is squashed. 1) the bank didnt cover him by insurance as agreed so why should he be burdened by their deception? 2) it is haram to sell debts where riba are based so the agency purchased a haram debt. 3) the agency took a risk and bought his debt knowing by law if they cant collect the money in six years the debt is squashed. 4) He didnt ask the agency to buy his debt and take this risk. The six years are well gone and the agency no longer asks him to repay the debt because its illegal. If we are expecting to follow kuffar law in their land can we not use their oaw against them also? He has made sincere tawbah and to clear his conscience vowed to donate the same amount of loan as kafarah to charity to not benefit from haram loans. please advise.
Answer:
All perfect praise be to Allah, The Lord of the Worlds. I testify that none is worthy of worship except Allah and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and messenger.
We can sum up the answer to your questions in the following:
Firstly, borrowing money with Riba (interest and/or usury) is forbidden except for a necessity. Likewise, insuring the debt through a commercial insurance company is also forbidden; both are evil.
This man should take a lesson from what had happened to him. Therefore, he must sincerely repent to his Lord and regret what he had done. He should be determined not to return to it again, abundantly ask forgiveness from Allah and should perform as many good deeds as possible, because good deeds wipe out the bad ones.
Secondly, the bank selling his debt: this is not permissible, and it does not drop the debt from the debtor, even if the law states that the debt is dropped. The debtor must pay the remainder of the original debt without its interest and without anything which the company unjustly demanded from him, such as repaying the entire loan and its interests, without taking into account what he has already paid to the bank previously.
Thirdly, if he cannot repay what is left of the original loan to the company, then it is sufficient for him to donate its equivalent to the poor and needy on behalf of those who have that right, whom the law has prevented from taking their right and which they did not drop willingly.
This is in general, and one should ask the scholars orally about the issue. There are advisory bodies and Islamic Centers that deal with the issues of Muslim communities and they know their reality, and they are those who are more appropriate to address such issues.
For more benefit on selling a debt, please refer to Fataawa 8093 and 2736.
Allah knows best.