Must the bankrupt's primary residence be sold?
General Chapter
Al-Mughni
Book of the Insolvent (Bankruptcy)
Primary text
The bankrupt's house, which is indispensable for their lodging, must not be sold. This is the position held by Abu Hanifa and Ishaq.
Supporting text
Al-Sharih, Malik, and Al-Shafi'i hold that it must be sold, and the bankrupt should rent a replacement home. Ibn al-Mundhir favored this view, citing the Prophet's instruction to creditors regarding a person whose debt exceeded the value of their harvested fruit: 'Take what you find.' They argue this is an asset belonging to the bankrupt, and thus must be used for the debt, like the rest of their property. Our evidence is that this item is indispensable for the bankrupt and therefore should not be used for debt repayment, similar to their clothing and sustenance. The hadith concerns a specific incident and may imply the person had no other real estate or servant. Furthermore, the phrase 'Take what you find' might refer to what was given as charity; charity was first requested for the person, and when it was insufficient, the Prophet gave that instruction. The apparent meaning is that he was not given a house he needed to live in or a servant he needed for service. We argue their analogy is broken because the clothing and sustenance are necessities, but rent for lodging and other assets are not indispensable in the same way.