Does the original seller have the right of rescission (rujū') if the buyer mortgages the sold item and subsequently becomes bankrupt (iflās)?
General Chapter
Al-Mughni
Book of the Insolvent (Bankruptcy)
Primary text
The original seller does not possess the right of rescission if the buyer mortgages the sold item before becoming bankrupt, or if the buyer gifts the item away. This is because exercising the right of rescission would cause harm to the mortgagee (al-murtahin), and harm cannot be removed by inflicting further harm. Furthermore, the Prophet stated, 'Whoever finds his property in kind with a man who has become bankrupt, he has the greatest right to it.' In this case, the seller did not find his property in kind with the bankrupt person. There is no known disagreement on this point.