Dr. Monzer Kahf, a prominent economist and counsellor, states: Claiming false bankruptcy is forbidden in Shari `ah. It does not result in settling the debts on the claimer even if (s)he gets a clearance from a Muslim or non-Muslim court. In other words, a claimer of false bankruptcy still has to pay all the debts in full, even though a court may have settled them on partial payment.
this is in addition to making repentance and praying to God for forgiveness. The Shari `ah position is founded on a correct Hadith of the Prophet Muhammad (peace and blessings be upon him). He is reported to have said: If two persons come to me for a judgment on financial differences and one of them was more eloquent than the other and I gave judgment in his favor (founded on wrong basis), it is a piece of the Hell Fire, he may take it or leave it.
This applies to a person who is claiming as well as to one who already claimed it.
Claiming Bankruptcy: Is It Allowed?
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