How is a partial payment applied when a debtor owes one thousand units secured by a mortgage and another thousand unsecured, and the debtor states the payment was for the secured debt while the creditor claims it was for the unsecured debt?
General Chapter
Al-Mughni
Book of Pledges (Collateral)
Primary text
The statement of the debtor is accepted along with their oath. This applies whether the dispute is over the debtor's intention or their verbal declaration. The debtor is considered more knowledgeable of their intention and the nature of the payment they intended. Furthermore, since the debtor asserts the remaining debt is unsecured, and their statement regarding the original mortgage is accepted, their statement regarding its condition (the payment application) must also be accepted.
Supporting text
If the debtor makes the payment without specifying which debt it covers, Abu Bakr held that the debtor may designate the payment for either debt, similar to when one pays the Zakat due on only one of two existing wealth funds. Some Shafi'i scholars agree with this. Other Shafi'i scholars argue that the payment covers both debts equally, one half applied to each, due to their equality in the context of the payment. However, if the creditor explicitly forgives one of the two debts and a dispute arises, the creditor's statement is accepted, following the detailed reasoning established previously regarding the debtor.