Debt is something which is to be paid, such as money, goods, or services to a person or organization. The Arabic word for debt is DAYN. The fuqaha’ define dayn (debt) as an obligation to be fulfilled, as it says in Al-Mawsoo’ah al-Fiqhiyyah (21/102). The linguistic meaning of the word dayn in Arabic has to do with submission and humiliation. The connection between the shar’i meaning and the linguistic meaning is clear. Islam takes the matter of debt very seriously and warns against it and urges the Muslim to avoid it as much as possible.
And if you are on a journey and cannot find a scribe, then let there be a pledge taken (mortgaging), then if one of you entrusts the other, let the one who is entrusted discharge his trust (faithfully), and let him be afraid of Allah سبحانه و تعالى, his Lord. And conceal not the evidence, for he who hides it, surely, his heart is sinful. And Allah سبحانه و تعالىis All-Knower of what you do” Qur’an.Surah Al-Baqarah 2:282-283.
Hence in this case Allah سبحانه و تعالىcommanded the one who is in debt to fear Allah سبحانه و تعالىand discharge his trust: “let the one who is entrusted discharge his trust (faithfully), and let him be afraid of Allah سبحانه و تعالى, his Lord”. See Tafseer al-Sa’di, 168-172.
Al-Mubaarakpoori رحمت اللهsaid in Tuhfat al-Ahwadhi (4/164): The words “the soul of the believer is suspended” – Al-Suyooti رحمت اللهsaid: i.e., it is detained and kept from reaching its noble destination. Al-‘Iraaqi رحمت اللهsaid: i.e., no judgement is passed as to whether it will be saved or doomed until it is determined whether his debt will be paid off or not
It was narrated that ‘Umar ibn al-Khattaab رضي الله عنهsaid: Beware of debt, for it starts with worry and it ends with war. Narrated by Maalik رضي الله عنهin Al-Muwatta’ 2/770.
The Prophet ﷺrefrained from offering the funeral prayer for one who had died owing two dinars, until Abu Qataadah رضي الله عنهpromised to pay it off for him. When he saw him the following day and said, I have paid it off, the Prophet ﷺsaid: “Now his skin has become cool for him.” Musnad Ahmad 3/629; classed as hasan by al-Nawawi رحمت اللهin Al-Khalaasah 2/931 and by Ibn Muflih رحمت اللهin Al-Adaab al-Shar’iyyah 1/104.
We were sitting with the Messenger of Allah ﷺwhen he raised his head towards the sky, then he put his palm on his forehead and said: “Subhaan-Allaah! What a strict issue has been revealed to me!” We remained silent and were afraid. The following morning I asked him, “O Messenger of Allah ﷺ, what is this strict issue that has been revealed?” He said, “By the One in Whose hand is my soul, if a man were killed in battle for the sake of Allah سبحانه و تعالى, then brought back to life, then killed and brought back to life again, then killed, and he owed a debt, he would not enter Paradise until his debt was paid off.” Classed as hasan by al-Albaani رحمت اللهin Sahih Al-Nasaa’I 4367.
The scholars have stipulated three conditions for debt to be permissible:
1- The borrower should be determined to repay it.
2- It should be known or thought most likely that he is able to repay it,
3- It should be for something that is permissible according to sharee’ah.
The correct way of lending money is:
1- To specify the period of the loan, i.e., the length of time after which the loan must be repaid.
2- Writing down the loan and the time when it is to be repaid.
3- If the one who writes down the loan is a person other than the debtor, then the debtor is the one who should dictate to him the details of the loan.
4- If the debtor is unable to dictate because of sickness or some other reason, then the one who should dictate on his behalf is his guardian.
5- The loan should be witnessed, and the witnesses should be two men, or one man and two women.
6- The lender has the right to ask the borrower to guarantee the loan with a pledge which the lender will keep. The benefit of the pledge is that if the time comes for the debt to be repaid and the borrower refuses to pay, the item in pledge may be sold and the debt paid with that money; anything left over is to be given to the owner of the pledge, namely the debtor.
Guaranteeing a debt in one of these three ways (writing, witnesses or pledge) is mustahabb and is preferable, but it is not obligatory (waajib). Some of the scholars are of the view that it is obligatory to write down a loan, but most of the scholars say that it is mustahabb, and this is the more correct view. See Tafseer al-Qurtubi, 3/383. The reason for that is to protect people’s rights so that they will not be exposed to loss because of forgetfulness or confusion, and as a precaution against those who do not fear Allah سبحانه و تعالى.
Narrated by Abu Huraira رضي الله عنه: Allah's Messenger ﷺowed a man some debt (and that man demanded it very harshly). The companions of the Prophet ﷺwanted to harm him, but the Prophet ﷺsaid to them, "Leave him, as the creditor has the right to speak harshly." Sahih Al-Bukhari Hadith Vol3:777.
If you have loaned someone something and the person does not pay it back on its stipulated time, you have basically three options:
It was narrated from ‘Aa’ishah رضي الله عنهthat the Prophet ﷺused to say in his prayer: “Allaahumma inni a’oodhi bika min al-ma’tham wa’l-maghram (O Allah سبحانه و تعالى, I seek refuge with You from sin and heavy debt).” Someone said to him: “How often you seek refuge from heavy debt!” He said: “When a man gets into debt, he speak and tells lies, and he makes a promise and breaks it.” Sahih Al-Bukhaari 832 and Sahih Al- Muslim 589
It was narrated that Suhayl رضي الله عنهsaid: Abu Saalih رضي الله عنهused to tell us, when one of us wanted to sleep, to lie down on his right side and say: “Allaahumma Rabb al-samawaati wa’l-ard wa Rabb al-‘arsh il-‘azeem, Rabbaanaa wa Rabba kulli shay’in, Faaliq al-habb wa’l-nawa wa munzil al-Tawraati wa’l-Injeeli wa’l-Furqaan, a’oodhu bika min sharri kulli shay’in anta aakhidhun bi naasiyatihi. Allaahumma anta al-awwal fa laysa qablaka shay’un, wa anta al-aakhir fa laysa ba’daka shay’un, wa anta al-zaahir fa laysa fawqaka shay’un wa anta al-baatin fa laysa doonaka shay’un. Iqdi ‘annaa al-dayna wa aghninaa min al-faqri (O Allah سبحانه و تعالى, Lord of the seven heavens and the exalted Throne, our Lord and Lord of all things, splitter of the seed and the date-stone, Revealer of the Tawraat and the Injeel and the Furqaan [Qur’aan], I seek refuge in You from the evil of all things You shall seize by the forelock [have total mastery over]. O Allah سبحانه و تعالى, You are the First so there is nothing before You, and You are the Last so there is nothing after You. You are al-Zaahir [the greatest and highest] so there is nothing above You, and You are al-Baatin [aware of the subtlest secrets] so there is nothing closer than You. Settle our debt for us and spare us from poverty).” He narrated that from Abu Hurayrah رضي الله عنه from the Prophet ﷺNarrated by Sahih Al-Muslim 2713.