A man suffered a loss during the time of the Messenger of Allah ﷺ in fruits he had purchased, and his debts mounted.The Messenger of Allah ﷺ said, "Give him charity."So the people gave him charity, but it did not amount to enough to settle his debts.The Messenger of Allah ﷺ then said to his creditors, "Take what you find, and you are entitled to nothing beyond that."
أصيب رجل في عهد رسول الله ﷺ في ثمار، ابتاعها، فكثر دينه، فقال رسول الله ﷺ: تصدقوا عليه. فتصدق الناس عليه، فلم يبلغ ذلك وفاء دينه، فقال رسول الله ﷺ لغرمائه: خذوا ما وجدتم، وليس لكم إلا ذلك.
Muslim narrated it in Musaqat (1556), from Qutayba bin Saeed, who said, "Layth narrated to us, from Bukayr, from Iyad bin Abdullah, from Abu Saeed Khudri," and he mentioned it.Al-muflis (the bankrupt) is one who has become possessed only of fulus (copper coins) after having been possessed of dirhams and dinars. In the usage of the Arabs, it refers to one who has no wealth, whether in cash, goods, or anything else.There is no disagreement among the scholars that the wealth of a bankrupt person is divided among his creditors according to the proportion of their debts. The disagreement concerns a man who has become bankrupt while debts remain owed by him, whether he is permitted to engage in buying and selling or not.The sahih view is that he is permitted to buy and sell so long as the judge has not placed a restriction on him. Once the restriction has been imposed, however, his dealings with his wealth are no longer valid. This is the position of Shafii.Abu Hanifa said that the ruler has no authority to restrict him, nor to prevent him from dealing with his wealth, but rather he imprisons him so that he may pay off what he owes, while he himself sells what he has.