Shariah Solutions to Minimising Personal Bankruptcy Cases in Malaysia: a Juristic Analysis

This study aims to analyse the Shariah principles for borrowing and lending practices to minimise bankruptcy cases among the public. Several elements in the Shariah may have effect changes in the behaviours and attitudes of debtors. Firstly, Shariah discourages individuals from taking a loan for luxury items even though it is permissible in Shariah. Secondly, people are advised to be prudent in their spending and cautious against succumbing to desires. Finally, there is a genuine concern in Shariah on the repayment of loans and debts. Apart from that, Shariah advises the creditors to extend the time for repayment without charging interest if the debtor is in difficulty. For Islamic financial institutions, Shariah prescribes profit and loss sharing contracts. Furthermore, different types of charities, i.e. zakat, sadaqah and waqf, might be used in the Muslim society to protect the debtors from bankruptcy. This study adds new knowledge in Islamic financial literacy, which would contribute to enhancing the financial well-being of the people.


Introduction
Bankruptcy is a legal status engaging an individual or business entity that cannot repay the debts it owes to the creditors (Ann-Yew, 2017;Faizal, Diana Rose;Mohd Ashhari, 2015).According to the Malaysian Department of Insolvency ( 2021), Malaysia has an alarming number of bankruptcy cases.As shown in table 1, from January 2017 to June 2021, the total Al-Ahkam Jurnal Ilmu Syari'ah dan Hukum ~ Vol. 8, Nomor 1, 2023 implement pertinent policies to minimise bankruptcy.Finally, it will contribute to the socioeconomic development of Malaysia by enhancing the financial well-being of the people.The outcome of this study is directly related to public affairs as it makes some policy recommendations for creating awareness among the public for improving their personal finances.Moreover, the study would educate the Muslim population in Malaysia and non-Muslims on managing their loans and debts.This might be very effective during and after the covid-19 pandemic when almost half of the country's households struggle to manage their finances due to loss of jobs or salary cuts (Morgan & Trinh, 2021).The study findings are highly relevant when the country's household debt has reached the highest level with the household debt to gross domestic product (GDP) ratio of 93.3 per cent at the end of 2020 (Bank Negara Malaysia, 2020).
The paper starts with the literature review that includes the definition of bankruptcy, statistics of bankruptcy in Malaysia and the concept of loan, debt and bankruptcy in the Shariah.After that, the methodology, findings and discussion are provided.It then discusses the procedures to implement the Shariah principles to minimize bankruptcy and its challenges.

Bankruptcy in the Conventional Law
'Bankruptcy' is derived from 'banca rotta', which denotes broken bench.In the ancient Italian custom, creditors would gather to break the debtor's workbench to end his debt.If the debtor did not pay his debt, he was considered as refusing to pay the debt.Therefore, the creditors were permitted by law to enter the workplace or house of the debtor and break his workbench.According to Roman law, the debtor's assets should be liquidated to pay the creditors.However, this law was later amended by allowing the debtor to voluntarily give up his assets to the creditors through an application to the court (Beraho & Elisu, 2011).
In English law, bankruptcy used to be considered a criminal offence in the past.The bankruptcy law was quite strict in England, where the debtor had minimal means after the declaration of bankruptcy.Therefore, if someone was declared bankrupt due to job loss or sickness, he used to be in a problematic situation.However, the bankruptcy law is amended in the modern-day, and it has been flexible for the debtors.At present, a person is declared bankrupt by a court order through filing a petition by the creditor or the borrower.A debtor can make his own petition based on the reason that he is unable to pay his debt.After a person is declared bankrupt, his matter is managed by a trustee who will sell the assets of the bankrupt person and will pay the creditors.An individual declared bankrupt is not allowed to borrow from anyone except that he informs the lender that he is bankrupt.Furthermore, he is not eligible to be a company director (Beraho & Elisu, 2011;Di Martino, 2008;Reuters, 2021).

Statistics of Bankruptcy Cases in Malaysia
According to the Malaysian Department of Insolvency ( 2021), Malaysia has an alarming number of bankruptcy cases.Until June 2021, the total number of insolvency cases in Malaysia was 292,447.From 2017 to June 2021, the court administered 58,795 insolvency cases.In the first half of 2021, there were 3,684 cases registered for bankruptcy.It means that, on average, 614 cases per month and 20 cases per day are registered for insolvency.Source: Malaysian Department of Insolvency (2021) Table 3 shows the bankruptcy cases for the last five years based on the genders.It shows that males have almost three times higher bankruptcy ratio than females on average.While males have 42,000 cases from January 2017 to June 2021, females have 16,786 cases.The number of bankruptcy cases has dropped gradually for the last five years, both for males and females.

The Concept of Debt, Loan and Bankruptcy in the Shariah
Before discussing the Shariah solutions for bankruptcy, it is essential to understand the concept of bankruptcy in Shariah.Bankruptcy is the consequence of a debt or loan transaction.Therefore, it is essential to define the concept of debt and loans in Shariah before defining bankruptcy.

Debt and Loan (Qard) in the Shariah
The Arabic word that denotes the concept of debt is dayn.The word dayn means something which is not present whether it has a maturity date or not (Al-Fayruzabadi, 2005).The word dayn also denotes subjugating someone for obedience.It also means a loan when a person borrows money from another or when a person purchases something with deferred payment (Ibn Manzur, 1960).
Technically, from a broader Shariah perspective, dayn is a comprehensive term that includes any liability on a person, whether it is monetary or otherwise.Therefore, if a person misses a compulsory religious obligation, i.e. prayer or pilgrimage, then it is considered debt on him.Moreover, if someone destroys someone else's property, then providing compensation for that property is a debt on the person (Wazarah al-Awqaf wa al-Sha 'un al-Islamiyyah, 1983).However, the majority of scholars define dayn as a financial liability.According to Ibn Abidin (2003), dayn is any type of liability established upon a person through a contract or through consuming an asset, and what is found in his liability by his borrowings.So, dayn is more general than qard (loan).Ibn al-Humam (2003) elaborates that dayn includes any type of liability which is established upon an individual which might be compensation for destroying someone's property, or a loan that he has taken from someone, or a payment from a deferred sale contract, or payment against benefiting a usufruct, i.e. dowry for marriage or rental for a leasing contract.On the other hand, Ibn Arabi (2003) defined it in a narrower perspective.He stated that dayn is when in a transaction, any of the subject matter is delivered on the spot while the other is deferred.
In the context of this study, it is more appropriate to use the word dayn to mean any financial liability as we concentrate on the bankruptcy cases that occurred as consequences of non-fulfilment of financial liabilities such as the debt created as a consequence of a sale contract of murabahah, bay' bithaman ajil, or ijarah and unsettled profit acquired through musharakah, mudarabah or wakalah.
Another term used in the Qur'an to describe an indebted person is al-gharim.It means a person who has failed to repay his debt.According to Hanafi jurists, al-gharim is the one who has a debt, and his existing wealth does not reach the amount of nisab 1 after deducting for the debt.This person is eligible to receive zakah as he is considered poor (AL-Kasani, 1986).
In the Quran, there is another term -Qard or loan.The Quran says: "Whoever among you will lend Allah a good loan, He may return it after multiplying it manifold; Allah alone can increase and decrease (wealth), and to Him you shall return" (2:45).A person in need can incur qard al-hasan or a good loan.The 'good loan' in this ayah is a loan without interest.The purpose of this loan is to provide humanitarian assistance to those in need and strengthen them financially to help meet their essential requirements.Qard is usually given Al-Ahkam Jurnal Ilmu Syari'ah dan Hukum ~ Vol. 8, Nomor 1, 2023 to a person (a household), but it can also be used for humanitarian or individual welfare purposes (Biplob, Hossain;Abdullah, 2019).
The word dayn is a general term that includes all types of financial liabilities.Therefore, qard is one kind of dayn, but not all types of dayn are qard.A dayn can take place when someone purchases an asset with deferred payment.On the other hand, a qard or loan occurs when an individual borrows money from someone.

Bankruptcy in the Shariah
The Arabic word for bankruptcy is iflas, and the bankrupt person is called muflis.According to Arabic linguistic scholar Al-Fayumi (1990), iflas means for a person when he becomes in a state of no money.From the Fiqh scholars' perspective, bankruptcy is when the property of the debtor is not sufficient to cover his debt.If a person faces this situation, then he is declared bankrupt (International Islamic Fiqh Academy, 2012).According to Ibn Qudamah (1997), a person with some wealth can be termed bankrupt if his debt is more than his wealth.This is because his wealth should be spent to pay the debt.Therefore, his wealth is similar to non-existent.Scholars use the term "taflis" when the judge declares the debtor as bankrupt by preventing him from spending his property.So, taflis is the consequence of iflas (Wazarah al-Awqaf wa al-Sha 'un al-Islamiyyah, 1983).Compared to the Malaysian definition of bankruptcy, Shariah defines bankruptcy more stringently.This is because Shariah does not consider any minimum amount of debt for declaring someone bankrupt.At the same time, Malaysian law requires that the minimum amount of debt should be MYR50,000 for declaring a person bankrupt.Therefore, it can be deduced here that Shariah is more concerned with protecting the rights of the creditors.
The majority of fiqh scholars from the four schools of thought agreed that when the debt is matured, and the debtor is unable to pay the debt, the judge should declare the debtor as bankrupt if the creditors seek repayment (Wazarah al-Awqaf wa al-Sha 'un al-Islamiyyah, 1983).The following prophetic narration describes that the Prophet Muhammad (SAWS) sold the asset of his companion Muadh (RA) to settle his debt: "Ibn Ka'b bin Malik narrated from his father that the messenger of Allah (SAWS) seized the property of Mu'adh and sold them to repay the debt that he (Mu'adh) possessed" (Al-Daruquthni, 2004) 2 .

Research Method
Given the objective of this research, it adopts a qualitative approach.Qualitative research is employed to get expressive information which cannot be achieved in quantitative data, i.e. beliefs, values, feelings and motivations that shapes the behaviours.It is often used for generating ideas for improvements (Berkwits & Inui, 1998;Qualitative Research Al-Ahkam Jurnal Ilmu Syari'ah dan Hukum ~ Vol. 8, Nomor 1, 2023 Consultants Association, 2017).In the context of this study, primary sources of the Shariah and several classical Islamic works of literature in the field of Islamic jurisprudence are reviewed.The sources of the Shariah can be divided into two types which are (1) primary sources and (2) secondary sources.The primary sources are the Quran, Sunnah, Ijma and Qiyas (Al-Zuhayli, 1986).This study adopted an inductive approach to review the texts of the Quran and Sunnah to find out any Shariah rulings related to debt and bankruptcy.After getting the related texts, the commentaries of the Quran and Sunnah are read for a better understanding of the texts.Moreover, this study reviewed the opinions of the classical scholars of Islamic jurisprudence from the four school of thoughts, namely, Hanafi, Maliki, Shafi'i and Hanbali.Manuscripts of the scholars starting from the ninth century have been reviewed in order to derive the Shariah rulings for debt, bankruptcy, borrowing and lending practices.After the data is collected from the primary sources of the Shariah and manuscripts of the classical scholars, they are analysed thematically.Thematic analysis is a procedure in which the data gathered are read multiple times to find out the common issues, the main themes that summarise all the opinions gathered.(Fereday, 2006;Brikci and Green, 2007).In this study, the data gathered are divided into three main themes, which are (1) Shariah guidelines for the debtor, (2) Shariah guidelines for Islamic financial institutions, and (3) Shariah guidelines for the society.

Findings and Discussion
The Shariah prescribes several rulings for the debtor, creditor, Islamic financial institution and the society to minimise bankruptcy cases.It sets principles to motivate the debtor to pay back his debt.On the other hand, some Shariah principles are directed to the creditor to be flexible with the debtor.Apart from that, Shariah sets principles for the society, government and Islamic financial institutions to reduce bankruptcy issues.This section elaborates what Shariah prescribes to reduce the number of bankruptcies among young adults.

Shariah Guidance for the Debtor
Shariah motivates the debtor to be sincere in paying back the loans.It suggests that in order to avoid financial distress, loans should not be taken for luxury, which is excess to needs.The Quran and Sunnah condemn the wastage of wealth, which is consuming wealth more than one's needs.Allah says: "O children of Adam! attend to your embellishments at every time of prayer, and eat and drink and be not extravagant; surely He does not love the extravagant" (Surah al-'Araf: 31).Even though this ayah specifically mentions the wastage of food and drink, it provides a general rule for the consumption of wealth.Similarly, Jabir ibn Abdullah narrated that: Allah's Messenger (peace be upon him) said: "There should be Al-Ahkam Jurnal Ilmu Syari'ah dan Hukum ~ Vol. 8, Nomor 1, 2023 a bedding for a man, a bedding for his wife and the third one for the guest, and the fourth one is for the Satan" (Muslim, 2006) 3 .This narration denounces the action of having an excessive number of accommodations which is more than one's need.In the commentary of the Hadith, Al-Nawawi (1994) mentions that whatever exceeds the need is for pride, show and amusement of the worldly life.Whosoever has this characteristic is reprehensible, and every reprehensible action is related to the Devil.
Therefore, it might be appropriate to make an analogy based on the aforementioned hadith that it is not recommended in the Shariah to use an excessive number of materials i.e. vehicles and houses without any real purpose.In the same way, it is not encouraged to assume loans and debts to purchase such goods, i.e. houses, vehicles for the purpose of luxury, but not to fulfil needs.This is because consuming properties for luxury is disliked in Islam and assuming debt to achieve those properties is discouraged.
Debt is not desirable in Islam as indicated in the Prophet's continuous prayer to Allah SWT to seek refuge from debt by saying, "O Allah, I seek refuge with you from all sins, and from being in debt."Someone said, O Allah's Messenger (SAWS)!( I see you very often you seek refuge with Allah from being in debt.He replied, "If a person is in debt, he tells lies when he speaks, and breaks his promises when he promises."(Al-Bukhārī, 2002) 4 .The Prophet (SAWS) used to pray to get rid of debt because it may lead to sins like telling lies, etc.In another narration, the Prophet (SAWS) used to pray: O Allah!I seek refuse from you from worries, sadness, disability, laziness, stinginess, cowardness, burden of debt and oppression of people (Al-Bukhārī, 2002) 5 .Laziness, cowardice and other characteristics mentioned in the hadith are not desirable.In the same way, debt is not desirable in Shariah.However, people may borrow in the case of need, provided that it is not for luxury.
Aside from that, the debtor should also control his spending behaviour.A significant number of Malaysian youths become bankrupt due to over-spending (Agensi Kaunseling Dan Pengurusan Kredit, 2014;Faizal, Diana Rose;Mohd Ashhari, 2015).The Shariah has provided principles for Muslims on how to consume.Firstly, it has set an objective for the spending which is fulfilling the needs but not desires.Secondly, it has provided the priorities to fulfil the needs.Finally, it has prohibited wastage (Hossain, 2014).
M. Fahim Khan (2013)which cannot be used to explain all aspects of consumer behavior.It suggests that consumer behavior is based on fulfilling needs and not on satisfying wants.And this is not merely semantic.It is a substantial difference and needs to be understood to properly explain the consumer behavior.It is also not a normative statement to say that consumer behavior is based on fulfilling needs.It is a positive statement reflecting reality.An alternative framework on this basis then has been developed for a more realistic analysis of consumer behavior.The proposed framework borrows elements from the methodological framework of Biology arguing that it provides more logical framework for analysis of consumer level like isr┐f, tabz┘r, itr┐f, wellbeing, consumer equilibrium etc.This behavior.This framework allows us to analyze economic problem at micro framework takes the position that the economic problems like unemployment, poverty, underdevelopment, environment issues etc. are rooted in the consumer behavior and consumer decisionmaking.It has also been argued that the proposed framework provides a basis to make interpersonal comparison of wellbeing and hence provides objective basis for public policy choices.This is not yet a presentation on Islamic theory of consumer behavior.It is simply a proposal to see consumer behavior in a different perspective, which is claimed to be more realistic and more logical.A presentation will be made separately to use this framework to develop Islamic theory of consumer behavior, which will add the concept of "Rushd" (as opposed to the concept of "Rationality" in secular Economics states that human beings desire to possess different types of wealth, i.e. cars, houses, computers, etc.However, not all of his desires are needs.Some of his desires are needs, while others are luxuries.However, a Muslim is advised to make wise decisions by purchasing on meeting needs only.A man needs to be rational to justify his needs for his well-being and keep his emotions aside.The desires which are not needed should go unsatisfied.A rational consumer should prefer the needs over his desires in order to fulfil his well-being.Sometimes a person spends exsessively or beyond his need to follow his desires.Islam always forbids overspending, which is strongly discouraged by the ayah.In this regard, Allah says, "O children of Adam, wear your beautiful apparel at every masjid, and eat and drink but be not excessive.Indeed, Allah does not like the excess."In this ayah, Allah uses the word israf, which means excessive or beyond the limit (Biplob & Abdullah, 2021).
After setting the goals of going for needs, a rational man should follow the hierarchy of needs.He should satisfy the top level of needs first, followed by the secondary needs.In this regard, Maqasid al-Shariah's level of needs might be referred to (M.Fahim Khan, 2013)which cannot be used to explain all aspects of consumer behavior.It suggests that consumer behavior is based on fulfilling needs and not on satisfying wants.And this is not merely semantic.It is a substantial difference and needs to be understood to properly explain the consumer behavior.It is also not a normative statement to say that consumer behavior is based on fulfilling needs.It is a positive statement reflecting reality.An alternative framework on this basis then has been developed for a more realistic analysis of consumer behavior.The proposed framework borrows elements from the methodological framework of Biology arguing that it provides more logical framework for analysis of consumer level like isr┐f, tabz┘r, itr┐f, wellbeing, consumer equilibrium etc.This behavior.This framework allows us to analyze economic problem at micro framework takes the position that the economic problems like unemployment, poverty, underdevelopment, environment issues etc. are rooted in the consumer behavior and consumer decision-making.It has also been argued that the proposed framework provides a basis to make interpersonal comparison of wellbeing and hence provides objective basis for public policy choices.This is not yet a presentation on Islamic theory of consumer behavior.It is simply a proposal to see consumer behavior in a different perspective, which is claimed to be more realistic and more logical.A presentation will be made separately to use this framework to develop Islamic theory of consumer behavior, which will add the concept of "Rushd" (as opposed to the concept of "Rationality" in secular Economics.According to the Maqasid al-Shariah, the needs are divided into three levels: daruriyyat, hajiyat and tahsiniyat.Daruriyyat are the needs that are indispensable for human beings, such are food, shelter, medication, etc. Human beings must satisfy this category of needs.Human life is not sustainable without the daruriyyat.The absence of daruriyyat poses threats to the existence of human life.Therefore, a Muslim consumer should satisfy these needs first (Asy-Syatibi, 1997).
The second category of needs is termed hajiyat.A man can survive without hajiyat, but his life will be full of hardship, such as transportation (Asy-Syatibi, 1997).After fulfilling the first level of needs, he should satisfy the hajiyat.However, if his money is finished by meeting the daruriyyat, then he should wait to fulfil this need.
The third level is called tahsiniyyat.Tahsiniyyat completes the needs of a man.Anything that contributes to the well-being of the person comes under this category, such as cleanliness (Asy-Syatibi, 1997).This should be chosen after fulfilling the first and second categories.It is not wise to spend for this category before the first and second categories (M.Fahim Khan, 2013)which cannot be used to explain all aspects of consumer behavior.It suggests that consumer behavior is based on fulfilling needs and not on satisfying wants.And this is not merely semantic.It is a substantial difference and needs to be understood to properly explain the consumer behavior.It is also not a normative statement to say that consumer behavior is based on fulfilling needs.It is a positive statement reflecting reality.An alternative framework on this basis then has been developed for a more realistic analysis of consumer behavior.The proposed framework borrows elements from the methodological framework of Biology arguing that it provides more logical framework for analysis of consumer level like isr┐f, tabz┘r, itr┐f, wellbeing, consumer equilibrium etc.This behavior.This framework allows us to analyze economic problem at micro framework takes the position that the economic problems like unemployment, poverty, underdevelopment, environment issues etc. are rooted in the consumer behavior and consumer decisionmaking.It has also been argued that the proposed framework provides a basis to make interpersonal comparison of wellbeing and hence provides objective basis for public policy choices.This is not yet a presentation on Islamic theory of consumer behavior.It is simply a proposal to see consumer behavior in a different perspective, which is claimed to be more realistic and more logical.A presentation will be made separately to use this framework to develop Islamic theory of consumer behavior, which will add the concept of "Rushd" (as opposed to the concept of "Rationality" in secular Economics.After providing suggestions to avoid debt, the Shariah offers spiritual tools to overcome debt.Firstly, while making any debt obligation, a person should have a sincere intention to fulfil the obligation.The Shariah condemns a group of people who borrow from people with the intention to consume their money wrongfully.This type of people seek money from people by presenting artificial needs, and after getting the money, they consume it without intending to repay it.It is narrated from the Prophet (SAWS): "Whosoever takes people's wealth with the intention to destroy it then Allah SWT destroys that person (Al-Bukhārī, 2002) 6 .On the commentary of the above narration, Al-ʿAsqalānī (1971) states that when a person assumes a loan with the intention to pay it back, Allah SWT provides for him the opportunity to pay it back.On the other hand, when the debtor does not intend to pay it back, then Allah SWT may punish him in this world by destroying him or his wealth.Furthermore, he will be punished for his action in the Hereafter.This hadith contributes to developing the good character of a debtor.Furthermore, after having incurred debt due to fulfilling someone's needs, he is advised to supplicate to Allah that He will provide him with the opportunity to pay back his debt.In a narration, Ali bin Abi Talib (RA) said to someone who complained to him about his debt: "Shall I not teach you a prayer which the messenger of Allah (SAWS) [taught me]?If you have a mountain of debt, Allah SWT will pay it for you."He said: you say "O Allah please make for us your permissible provisions sufficient from the non-permissible income.Enrich us with your bounties from others" (Al-Tirmidhi, 1996).The above narration further clarifies that the Shariah provides spiritual support for a person to pay his debt.

Punishment for a Solvent Debtor
Along with the punishment in the Hereafter, there is worldly punishment for a solvent debtor.When a person intentionally procrastinates to fulfil the debt obligation while having the ability to do so, the person is considered unjust and worthy of punishment in this world and the Hereafter.The Prophet (SAWS) said in this regard: "Procrastination by the solvent debtor deserves him punishment and his dignity been compromised" (Abu Dawud, 1997) 7 .Hasan et al., (2018) mentioned that based on the hadith, it unanimously agreed by the Shariah scholars that the solvent debtor could be put into prison for denying the payment of debt.The solvent debtor should be arrested and imprisoned until the debt is settled.Referring to the prophetic narration, Muslim jurists also remark that it is allowed in Shariah to force the debtor to pay his debt using hash words.
Muslim jurists also allow the solvent debtor to be beaten if he does not pay the debt.According to Ibn Taymiyah (1987), whosoever is capable of paying his debt but refuses to pay, he should be compelled to pay the debt through beating and imprisonment.The scholars from the Maliki, Shafi'i and Hanbali School agreed on this.No disagreement is known on this issue.Therefore, a solvent debtor should be punished until he repays the debt.Otherwise, the judge should be able to dispose of his property to settle his debt.This is a form of removing harm from the creditor.This is permissible based on the major legal maxim of the Shariah: "harm shall not be inflicted nor be reciprocated" (Ibn Nujaim, 2005).

Shariah Advice for the Creditor
The Shariah places great concern on the repayment of debt for the debtor, while also recommending the creditor to practice tenderness with the debtor when the debtor is in genuine difficulty.Tenderness can be practised by extending the deadline for the debt or forgiving full or partial payment of the debt.
When the debtor does not have solvency, then Shariah advises the creditor to extend the due date.It is strongly recommended for the creditor to extend the deadline of payment when the debtor is in difficulty.Allah SWT says: "And if the creditor is in a hard time (has no money) then grant him time till it is easy for him to repay (2:280)."In a prophetic narration, if a believer practices tenderness with his fellow Muslim believer, then Allah SWT will be tender with him on the Day of Judgement.The hadith reads: "He who removes from a believer one of his difficulties of this world, Allah will remove one of his troubles on the Day of Resurrection; and he who finds relief for a hard-pressed person, Allah will make things easy for him on the Day of Resurrection" (Muslim, 2006) 8 .Extending the deadline for the debtor is a form of tenderness by the creditor, which is encouraged.This is another mechanism through which bankruptcy can be avoided.This is a voluntary action by the creditor through which it may happen that the debtor may have enough funds to pay the loan at a later date.
Ibn Taymiyah (2005) recommends that if the debtor is insolvent at the time of maturity, the creditor should postpone the debt until the debtor becomes solvent to pay the debt.If the debtor is solvent at the time of maturity, then the creditor should not restructure the debt, but the most appropriate practice should be to liquidate the assets to pay off the loan.Concerning the above-mentioned ayah (2:280), Al Qurtubi (2003) relates the verse to the occasion of Banu Thaqif as a creditor who asked for debt settlement from Banu Mughirah, who was the debtor.Banu Mughirah expressed that they are in a state of difficulty as they do not have anything to pay back the debt.They requested to delay the payment of the debt to the next harvesting season.On this occasion, Allah SWT revealed the above ayah advising the creditor to extend the maturity date.Furthermore, it is recommended for the creditors to forgive the debt if the debtor has no money to pay.Allah SWT says: "But if you remit it by way of charity that is better for you, if you did but know" (2:280).According to Ibn Kathir (2000), Allah SWT advises the creditor to be patient with the debtor who is in difficulty and is unable to pay.This is Al-Ahkam Jurnal Ilmu Syari'ah dan Hukum ~ Vol. 8, Nomor 1, 2023 opposite to the practice of the pre-Islamic era when the debtor was in difficulty, and then he would be given a choice between either settling the debt on the spot or paying interest on the debt amount.Afterwards, Allah recommended forsaking the debt.The ayah denotes that it is better if you forgive the debt in full.
Following the ayah, several prophetic traditions denote that it is a recommended practice to relieve the debtor when he is in difficulty.Abu Huraira reported: The Messenger of Allah SAWS, said, "A man would give loans to the people, and he would say to his servant: If the debtor is in hardship you should forgive the debt that perhaps Allah will relieve us.So when he met Allah, then Allah relieved him" (Muslim, 2006) 9 .
The above tradition is a spiritual motivation for the creditors to forgive the insolvent debtor.Instead of declaring a person as bankrupt, the creditor has the option to free him from bankruptcy either through giving time or forgiving him from the obligation.It might be difficult for financial institutions to forgive the debtors as they need to work for the best interest of the depositors.Therefore, the financial institutions may have provisions where they may forgive a person when his insolvency is due to a reason which is beyond his control, i.e. accidents, sickness, etc.In this regard, the Shariah imposes that it should be proven in the court that the debtor is in a state of difficulty by providing evidence and the debtor making an oath to that effect (Ibn Taymiyah, 1987).

Shariah Guidance for Islamic Financial Institutions
Using equity-based contracts by Islamic financial institutions is another step to minimise bankruptcy.In equity-based financing, i.e. musharakah, mudarabah, the financial institution and the client share the profit and loss (Mirakhor, Abbas ;Zaidi, 2007).If a client takes financing to increase the working capital of his business and faces loss in his business, the financial institution should share the loss with the client.In this case, the client should not be bankrupt.Unfortunately, most Islamic financial institutions rely heavily on debtbased financing in order to minimise their risks (Abdul-Rahman, Aisyah;Nor, 2016;Dar & Presley, 2000;Farooq, 2017).This ultimately leads to many bankruptcy cases.Even in some cases when equity-based financing is used, Islamic financial institutions put a lot of terms and conditions on the clients which change the equity feature of the contract to debt.The customer is considered defaulted and declared bankrupt when he does not want to proceed with the musharakah contract in the musharakah mutanaqisah home financing, for example.However, musharakah is not a binding contract in Shariah.Any partner in a musharakah contract is permitted to opt-out from the musharakah at any time (Abdullah, 2016).
Apart from this, Islamic financial institutions need to make their utmost effort while evaluating the creditworthiness of a client.Bankruptcy may happen due to poor examination Al-Ahkam Jurnal Ilmu Syari'ah dan Hukum ~ Vol. 8, Nomor 1, 2023 of the client's creditworthiness (Akkizidis, Ioannis ;Khandelwal, 2008).Therefore, it is the responsibility of the respective financial institution and its financing officer to ascertain the appropriate solvency status for the client.The Prophet (SAWS) warned us in this regard that "Every one of you is a shepherd and is responsible for his flock" (Al-Bukhārī, 2002)  10 .Similarly, Islamic financial institutions should be responsible while marketing an Islamic financial product.It is not acceptable for an Islamic financial institution to persuade a client to take financing beyond his financial reach.The golden rule should be followed here: "treat others as you like to be treated."This principle can be comprehended through the prophetic narration, which reads: "None of you will have faith until he loves for his brother what he loves for himself" (Al-Bukhārī, 2002) 11 .Therefore, the financial institution should put itself in the client's shoes while marketing a financial product to determine whether the client can afford this type of product.

Shariah Guidance for the Society
Islam has prescribed zakah, a mandatory charity upon the rich to donate 2.5% of their wealth to be given to any of the eight types of recipients (Abu Bakar & Abdul Rahman, 2007;Dhar, 2013).Among those eight types of recipients, there is the debtor.The following ayah describes the recipients of zakat: Zakah expenditures are only for the poor and for the needy and for those employed to collect [zakah] and for bringing hearts together [for Islam] and for freeing captives [or slaves] and for those in debt and for the cause of Allah and for the [stranded] traveller -an obligation [imposed] by Allah.And Allah is Knowing and Wise.(Al-Quran, 9:60).
In the above ayah, Allah SWT declares that zakat can be given to a person who is in debt and does not have any means to fulfil his commitment.The Arabic term used in the ayah is al-gharim which means, according to Al Qurtubi (2003), the one who is overburdened with debt and undoubtedly is not able to pay it.If a person has some wealth, but it is not enough to pay his debt, he is considered as al-gharim.Besides, if a person does not have any wealth to pay back the debt, then he is a faqir (poor) and gharim (indebted) at the same time.However, Shariah stipulates that the debt taken should be for lawful purposes, for instance, buying a house, paying a medical bill, etc. (Shawish, 2015).
Al Qurtubi (2003) also stated that zakat funds should be used to pay the debt of a deceased.This is because the liability persists even after the death of the debtor.He provides the following prophetic narration to support his position: By Him in Whose Hand is the life of Muhammad, there is no believer on the earth with whom I am not the nearest among all the people.He who among you (dies) and leaves a debt, I am there to pay it and he who among you (dies) leaving behind children I am there to look after them.And he who among you Al-Ahkam Jurnal Ilmu Syari'ah dan Hukum ~ Vol. 8, Nomor 1, 2023 leaves behind property that is for the inheritor whoever he is (Muslim, 2006) 12 .This hadith says that the Prophet (SAWS) is the closest one to a believer.Therefore, he will pay the debt of the person who died, and he has debt.It means that it is allowed to pay the debt for a person who has passed away.
Along with zakat, voluntary charities, i.e. sadaqah and waqf can be given to the indebted person who cannot fulfil his debt (Ibrahim et al., 2008).Bensaid et al., (2013) recommend that it is the duty of the Muslim society to pay for the children who have inherited debt from their parents and should remove other types of financial difficulty from them.Society's role cannot be overlooked in this matter.The following hadith shows an example of that: Imam Muslim recorded from Abu Sa'id al-Khudri (RA) that a person faced loss in his fruit business and his debt extended.The Prophet SAWS told them "donate for him" then the people started to donate for him.However, their donation still did not fulfil all the obligations.Then the Prophet SAWS told the creditors: "take whatever you have got and you do not have more than that" (Muslim, 2006) 13 .
It is clear from the above hadith that when a debtor is in genuine difficulty, then Muslims are encouraged to make voluntary donations to remove the burden of debt from the debtor.In the present-day context, donation-based crowdfunding initiatives can be taken to collect donations to help those who are overburdened with debts due to genuine reasons.Alternatively, a cash waqf fund may be established by the Islamic financial institutions to help people overburdened with debt due to valid reasons.However, there should be criteria to prove that the person is in genuine difficulty so that people do not abuse the facility.
Another way of removing bankruptcy is that a Muslim pays the debt of his Muslim brother.As discussed in the hadith narrated by Jabir, a person passed away, and the Prophet (SAWS) did not perform the funeral prayer for him.After that, Abu Qatadah took charge of the debt, and the Prophet (SWAS) prayed for him.This is an instant wherein bankruptcy can be removed through donations from fellow Muslims.

Conclusion
In conclusion, Shariah offers several solutions to minimise bankruptcy; firstly, concerning the debtor, Shariah emphasises that he should pay the debt.Delaying debt payment for a solvent debtor is termed a major sin.The solvent debtor may be punished for his procrastination in paying the debt.The severity of debt is that the Prophet Muhammad (SAWS) did not perform the funeral prayer for a person who died while in debt.A person's sins may be forgiven except the sin of debt.The person who is borrowing should do it with the intention to repay it.In order to avoid the burden of debt, Shariah discourages a person from assuming loans for luxuries.Debt should be taken to fulfil needs.The Shariah provides a guideline to stop unwise spending as financial distress occurs due to over-spending.According to the Shariah framework, a person should spend to fulfil his needs but not his desires.Any expenditure which is not a need is considered waste and is not recommended.He should spend for the top level of needs first, which is termed daruriyyat, followed by hajiyyat and tahsiniyyat.
From the lender's perspective, Shariah recommends the lenders extend the deadline when the debtor is in difficulty.It is praiseworthy to forsake a portion of the debt or the entire debt.In relation to Islamic financial institutions, they are urged to provide equitybased financing to clients.In this way, the financial institution can share the risk of loss of a client's business.Also, Islamic financial institutions should be responsible for determining a client's creditworthiness while marketing a financial product.
For the Muslim society, the Shariah prescribes zakah, a compulsory donation given to a person who cannot pay his debt.Moreover, Shariah recommended voluntary payment of debt on behalf of the debtor or any kind of voluntary charity.Donation-based crowdfunding can be a good option.Besides, cash waqf, a type of perpetual charity fund, can be established by financial institutions and the government to help those who are overburdened with debts, provided that some criteria are set to avoid the misuse of funds.
Further studies should be done on how Shariah solutions can be implemented by the government, credit counselling agencies, financial institutions and society.In particular, indepth research should be done on how Islamic financial institutions and zakah management authorities can collaborate to help the bankrupt.Along with this, further research should be conducted on the possibility of establishing a cash waqf fund by Islamic financial institutions to assist the bankrupt.

Table 1 : Bankruptcy cases based on age group from 2017 to June 2021
Table1shows the bankruptcy cases based on the age group.Individuals aged between 35 to 44 years have the highest number of insolvency cases, with 21,355 cases representing 36.32% of all the age groups.This is followed by those aged between 45 to 54 years, with 14,932 corresponding to 25.40%.Individuals aged between 25 to 34 years rank third, with 13,895 cases representing 23.63% (Malaysian Department of Insolvency, 2021).It means that more than 59% of bankruptcy cases fall between the age group of 25 to 44 years.Moreover, almost one-fourth of the bankruptcy cases involve individuals aged 25 to 34.

Table 2
shows the proportion of race in bankruptcy cases from 2017 to 2021.Malays recorded the highest number, with 34,282 cases (58.31%).Chinese and Indian rank second and third with 14,054 (23.90%) and 5,693 (9.68%) cases, respectively (Malaysian Department of Insolvency, 2021).It appears that the percentage of bankruptcy cases somehow follows the percentage of the races in the total population of Malaysia.Malays, with the majority of the population, record the highest number of bankruptcy cases in the country.However, compared to their percentage in the total population in Malaysia (70 per cent approximately), their bankruptcy rate is lower (Department of Statistics Malaysia, 2021).