How are creditors from a first bankruptcy restriction treated when the debtor incurs new debts leading to a second restriction?

General Chapter

Al-Mughni

Book of the Insolvent (Bankruptcy)

Book 14 · Issue 3 · Bab 1

Open in Qurani

Primary text

When the restriction is re-imposed due to newly incurred debts, the creditors of the first restriction share with the creditors of the second restriction. However, the first set of creditors share based on the remainder of their debt, while the second set share based on the entirety of their debt. This is the position of Al-Shafi'i. The basis for sharing is that they are equal in establishing their rights against his liability, thus they are equal in entitlement, similar to those whose rights were established under a single restriction or their equality in inheritance or blood money (Arsh al-Janiyah). Furthermore, his earnings constitute wealth belonging to him, making them equal in entitlement therein, just as in inheritance.

Supporting text

Malik holds that the creditors of the first restriction do not enter into the distribution with those who have newly established claims until the latter are fully satisfied, unless there is a benefit such as an inheritance or an injury for which he receives compensation (Janiyah), in which case the creditors share therein.