As far as dealing with a poor defaulter is concerned Islam does not encourage in burdening him with interest on the loan amount or in oppressing him in any other way. On the contrary, the Holy Quran encourages the creditor to postpone the date of payment till a time when the debtor is in a position to pay back the loan. If the debtor’s financial condition shows no sign of improvement then the creditor is expected to be benevolent enough to forgive the loan as an act of charity. Here are a few ahadith which prove that though forgiving a loan may seem to be a foolish mistake to some but in reality, it is a noble deed by which one can earn Allah (swt)’s goodwill.
*Sayyiduna Abu Huraira (ra) narrated that Prophet Mohamamd (saw) said: “Whosoever gives respite to a borrower who is in difficulty or forgives him altogether, Allah most high will give him refuge under the shadow of His Throne on the day when there will be no other shadow”. (Sunan Tirmidhi # 1306)
*Sayyiduna Abdullah Ibn Umar (ra) narrates that Prophet Mohammad (saw) said: “Whoever desires to be saved by Allah from the torments of the Day of Resurrection should give respite to the bankrupt (borrower) or forgive (his debt). (Sahih Muslim # 1563)
* Sayyiduna Abdullah Ibn Umar (ra) narrates that Prophet Mohammad (saw) said: “Whosoever wishes that his prayers be answered and his misfortunes be lifted, he should give respite to an insolvent debtor. (Musnad of Imam Ahmad, # 4735)
Islam also allows the lender to demand money from a bankrupt defaulter if he wishes to do so. The lender can keep an eye on the debtor and can keep asking for the loan amount persistently. However, if the lender gives respite to the debtor or if he forgives the loan then he would be showing high moral principles which deserve great rewards from Allah (swt) in this life and in the one hereafter.
After analyzing the above mentioned ahadith we can conclude that it depends on the lender whether he wishes to earn Allah (swt)’s goodwill by showing mercy towards the poor, bankrupt debtor or not.
Keep Me In Your Prayers.