Andy Gross, a businessman who is proud that he is now observing mitzvos, is on time for his appointment. After a brief greeting, I ask him what brings him to my office on this beautiful morning.

“I recently learned that even though the Torah prohibits paying or receiving interest, there is something called a heter iska that legalizes it. How can we legitimize something that the Torah expressly prohibits?”

Indeed, Andy’s question is both insightful and important, and deserves a thorough explanation. Why don’t you join us!

I note that this week’s parsha discusses the prohibition of interest:

Do not collect interest from him, for you shall fear Hashem and allow your brother to live. Therefore, do not provide him money with interest (Chapter 25:36-37).

This verse teaches three different mitzvos:

1. Do not collect interest from him. This entails a prohibition on the lender against collecting interest (Bava Metzia 75b).

2. Allow your brother to live. From the words allow your brother to live we derive a positive commandment that one who did collect interest is required to return it (Bava Metzia 62a).

3. Do not provide him money with interest. This prohibits creating a loan that involves interest, even if the lender never collects it (Bava Metzia 62a). A lender who later collects the interest also violates the first prohibition, and if he subsequently does not return it, he violates the positive commandment.

Not only does the lender violate the prohibition against ribbis, but also the borrower, the witnesses, the broker, the co-signer, the scribe who writes up the loan document (Mishnah Bava Metzia 75b), the notary public who notarizes it, and possibly even the attorney who drafts a document that includes provisions for ribbis,all violate the laws of ribbis (Bris Yehudah 1:6). Thus, anyone causing the loan to be either finalized or collected violates the Torah’s law.

“The halachos of ribbis are quite complex,” I told Andy. “From my experience, even seasoned Torah scholars sometimes mistakenly violate the prohibition of ribbis. For example, having a margin account at a Jewish-owned brokerage, charging a Jewish customer for late payment, or borrowing off someone else’s credit line usually entail violations of ribbis. I even know of Torah institutions that ‘borrow’ the use of someone’s credit card in order to meet their payroll, intending to gradually pay back the interest charges.”

“Why does the last case involve ribbis?” inquired an inquisitive Andy.

“Let me present a case where I was involved. A Torah institution was behind on payroll, and had no one available from whom to borrow. The director asked a backer if the institution could borrow money through his bank credit line.”

“I still do not see any ribbis problem here” replied Andy, “just a chesed that costs him nothing.”

“To whom did the bank lend money?” I asked Andy.

“As far as they are concerned, they are lending money to the backer, since it was his credit line.”

“So from whom did the institution borrow? The bank did not lend to them. Doesn’t this mean that really two loans have taken place: one from the bank to Mr. Chesed, and another from him to the institution? The loan from the bank incurs interest charges that Mr. Chesed is obligated to pay. Who is paying those charges?”

“It would only be fair for the institution to pay them,” responded Andy.

“However, if the institution pays those charges, they are in effect paying more money to Mr. Chesed than they borrowed from him, since they are also paying his debt to the bank. This violates ribbis. The fact that the institution pays the bank directly does not mitigate the problem (see Bava Metzia 71b).”

Andy was noticeably stunned. “I have always thought of interest as a prohibition against usury – or taking advantage of a desperate borrower. Here the ‘usurer’ did not even lend any money, and thought he was doing a tremendous chesed for tzedakah; he did not realize that his assistance caused both of them to violate a serious prohibition!”

“What is even more unfortunate,” I continued, “is that one can convert most of these prohibited transactions into a heter iska that is perfectly permitted.

WHAT IS A HETER ISKA?

“A heter iska is a halachically approved way of restructuring a loan or debt so that it becomes an investment instead of a loan. This presumes that the investor assumes some element of risk should the business fail, which is one basic difference between an investment and a loan. An investor could potentially lose money, whereas a lender does not lose because the borrower always remains responsible to pay.

“One is permitted to create a heter iska even when the goal of both parties is only to find a kosher way of creating a transaction that is very similar to an interest- bearing loan (Terumas Ha’deshen #302). The words heter iska mean exactly that: performing an allowable business deal that is similar to a prohibited transaction. As we will see, the structure must still allow for an element of risk and loss as accepted by halacha, otherwise it fails the test of being an investment.

“There are several ways of structuring a heter iska, and, indeed, different situations may call for different types of heter iska. In order to explain how a basic heter iska operates, I must first explain an investment that involve no ribbis, so that we can understand how a heter iska was developed. For the balance of this article, we will no longer refer to “borrowers” and “lenders.” Instead, I will refer to a “managing partner” or “manager” and an “investor.”

Andy interrupts my monologue. “Was heter iska used in earlier generations?”

THE EARLIEST HETER ISKA

“The concept of heter iska is many hundreds of years old. The earliest heter iska of which I am aware is suggested by the Terumas Ha’deshen (1390-1460). His case involves Reuven, who wishes to invest in interest-bearing loans to gentile customers, but does not want to take any risk. Shimon, who is an experienced broker of such loans, is willing to take the risk in return for some of the profit on Reuven’s money.

“Reuven wants a guarantee that he will receive back all his capital regardless of what actually happens in the business venture. Essentially, this means that Shimon is borrowing money from Reuven and lending it to gentiles; this would result in a straightforward Torah prohibition of ribbis, since Shimon is paying Reuven a return on the loan. Is there any way that Reuven and Shimon can structure the deal without violating the Torah’s prohibitions against paying and receiving interest?”

At this point, Andy exclaims: “Either this is a loan, and Reuven’s money is protected, or it is an investment, and it is not. How can Reuven have his cake and eat it too!”

“Actually, all the attempts at creating heter iska are attempts to find a balance whereby the investor is fairly secure that his assets are safe, and yet can generate profit. In your words, to try to have his cake and eat it.

PIKADON – INVESTING

“Let me explain how a heter iska accomplishes both these goals, by developing a case: Mr. Sweat has a business idea, but he lacks the capital to implement it. He approaches Mr. Bucks for investment capital. If Bucks has sufficient confidence in Sweat’s acumen to build a business, he might decide to invest even without knowing any details about it, since Sweat knows how to provide handsome profits. None of this involves any ribbis issues since there is no loan and no one is paying to use the other person’s capital. This business venture is called a pikadon.

GUARANTEEING THE INVESTMENT

“Your model is highly theoretical,” Andy points out, “since it assumes that Mr. Bucks invests without much assurance. Few people I know would entrust someone with their money without some type of guarantee.”

“You have hit on a key point – let us see how halacha deals with this. Whenever an investor entrusts someone with funds, the Torah permits him to demand an oath afterwards that the manager was not negligent. Therefore, Bucks may insist that Sweat swears an oath that he was not negligent with the money, and also that he reported accurately how much profit Bucks receives. An agreement may even require that Sweat swears this oath by using G-d’s name and while holding a Sefer Torah in front of the entire congregation.”

“That should certainly get Sweat to sweat,” quipped Andy. “But then again, assuming Mr. Sweat is a frum Jew, is he going to want to swear any oath at all?”

“That is exactly the point that secures Bucks’ bucks, since observant people would pay a substantial sum of money to avoid swearing an oath. The heter iska specifies that the manager has the option of swearing the oath and paying only what the investor is entitled. However, the manager also has the option of substituting an agreed-upon payment for the oath. Since observant Jews would rather pay the fixed return rather than swear an oath, we accomplish that the investor is reasonably secure, although no loan and no ribbis transpired. The result is not a loan, but a cleverly structured investment.”

After waiting a few seconds and absorbing what he just learned, Andy continued:

“Is there anything else I need to know about a heter iska before I use one?”

“I need to explain one other very important detail that, unfortunately, people often overlook. Most forms of heter iska state that the investor paid the manager a specific sum of money, say one dollar, for his time involved in the business venture. It is vitally important that this dollar be actually paid; otherwise there is a ribbis prohibition involved. Yet I know that many people overlook this requirement and do not understand its importance.”

“Why is this important?”

STANDARD ISKA – A SILENT PARTNERSHIP

“The standard heter iska assumes that the arrangement is half loan and half pikadon. This means that if Mr. Bucks invests $100,000 with Mr. Sweat to open a business, Mr. Bucks and Mr. Sweat become partners in the business because half of the amount is a $50,000 loan that Mr. Sweat must eventually repay, and the other half is a $50,000 outlay that Mr. Bucks has invested in a business that Mr. Sweat owns or intends to open. Bucks may receive no profit on the $50,000 loan he extended — if he does, it is prohibited ribbis. However, he may receive as much profit on the investment part of the portfolio as is generated by half the business. As a result, Mr. Bucks and Mr. Sweat are both 50% partners in the business.

RECEIVING PROFIT FROM THE LOAN

“However, there is an interesting problem that we must resolve. Bucks invested a sum with Sweat, for which he received a profit, and he also loaned Sweat money, for which he may not receive any profit. However, the return on the investment was realized only because Mr. Sweat is investing his know-how and labor to generate profit for the partnership – know-how and labor for which Bucks did not pay. Why is this not payment for Mr. Bucks’ loan, and therefore ribbis?

“This concern is raised by the Gemara, which presents two methods to resolve the problem.

“One approach is that the investor pays the manager a certain amount for his expertise and effort. As long as both parties agree in advance, we are unconcerned how little (or much) this amount is (Bava Metzia 68b). However, there must be an amount, and it must actually be paid. Even if they agree to a sum as paltry as one dollar, this is an acceptable arrangement, similar to Michael Bloomberg’s accepting one dollar as salary to be mayor of New York.”

“I now understand,” interjected Andy, “why it is so important that this amount be actually paid. If Mr. Sweat receives no compensation for his hard work on behalf of Mr. Bucks’ investment, it demonstrates that he was working because he received a loan, which is prohibited ribbis.”

“Precisely. However, there is another way to structure the heter iska to avoid the problem; have the profit and loss percentages vary. This means that if the business profits, the managing partner makes a larger part of the profit than he loses if there is a loss. For example, our silent and managing partners divide the profits evenly, but in case of loss, our manager is responsible to pay only 30% of the loss, which means that he owns only 30% of the business. The extra 20% of the profits he receives is his salary for managing the business. He is therefore being paid a percentage of Bucks’ profits for his efforts, similar to the way a money manager or financial consultant is often compensated by receiving a percentage of the profits on the funds he manages. Personally, I prefer this type of heter iska, but the type I described previously is perfectly acceptable as long as Mr. Sweat receives some compensation for his effort and know-how.

“The heter iska I have seen used by the Jewish owned banks in Israel includes this method. The bank invests 45% in a “business” managed by the mortgage borrower, but the borrower is entitled to 50% of the profits. Thus, he is ‘paid’ five per cent of the profits to manage the investment.”

“Can you explain to me how the Terumas Ha’deshen’s money lender would use a heter iska?” inquired Andy.

“Actually, his heter iska varied slightly from what we use today. Using today’s accepted heter iska, Shimon, the manager, accepts the money with the understanding that he is borrowing part and managing the balance for Reuven. He is compensated for his efforts according to one of the approaches mentioned above, and agrees in advance to divide the profits. He also agrees that he will swear an oath guaranteeing that he was not negligent in his responsibilities, and the two parties agree that if he subsequently chooses to pay Reuven a certain amount he is absolved of swearing the oath. Thus, Reuven’s return is not interest on a loan, but the amount Shimon had agreed to pay rather than swear how much he actually owes Reuven.

“This approach has been accepted by thousands of halachic authorities as a valid method of receiving a return on one’s investment that looks like interest but is not. The Chofetz Chayim notes that if someone can lend money without compensation, he should certainly do so and not utilize a heter iska, because he is performing chesed (Ahavas Chesed 2:15). Heter iska is meant for investment situations, and should ideally be limited to them.

“I would like to close by sharing with you a thought from Rav Samson Raphael Hirsch about the reason why the Torah prohibited interest. He notes that if the Torah considered charging interest to be inherently immoral, it would have banned charging interest from non-Jews, and also would have prohibited only the lender and not the borrower. Rather, Rav Hirsch notes, the Torah’s prohibition is so that the capital we receive from Hashem is used for tzedakah and loans, thereby building and maintaining a Torah community. The Torah’s goal in banning the use of capital for interest-paying loans is to direct excess funds to chesed and tzedakah.”

Foreword

As I discussed in a previous article, the mitzvah of shemittas kesafim comes into effect this year immediately before Rosh Hashanah. This law cancels all debts that someone is owed, meaning that the creditor cannot force collection.

Notwithstanding the mitzvah of shemittas kesafim, the Torah commands a lo sa’aseh, that states: “Be careful, lest (hishameir lecha pen) a wicked idea enter your heart, saying, ‘The seventh year, the year that releases, comes near’ and your eye disdains your brother, the pauper, and you fail to give him” (Devarim 15:9). Technically, the words “Be careful, lest” qualify as a mitzvas lo sa’aseh (Eiruvin 96a), although this mitzvah requires a positive action — to lend, notwithstanding the approaching deadline that will release the borrower from liability. This is in addition to the mitzvas aseih, the positive mitzvah, in effect at all times, to lend money whenever we are able.

Unfortunately, Jews violated both mitzvos and stopped lending money out of concern that they would not be repaid after the shemittah year. Since this violates a Torah law, Hillel felt the responsibility to create a system that allows loan collection, notwithstanding that shemittah has passed. The vehicle he created is called a pruzbul. The origin of this word is two Aramaic words that mean “benefit for the wealthy” (Gittin 36b). The Gemara notes that a pruzbul benefits both wealthy and poor – the wealthy, because it allows them to collect loans, and the poor, because they can now borrow money when needed.

To quote the two places where the Mishnah introduces pruzbul: “Hillel established the pruzbul as a tikun olam” (Gittin 34b). “A pruzbul is not released [by the shemittah year] — this is a takkanah established by Hillel the Elder, when he realized that people were refraining from lending money, and were thereby violating what the Torah commands, ‘Be careful lest…’ (Devarim 15:9), Hillel established the pruzbul (Shevi’is 10:3).”

How could he?

By what means could Hillel change the law that the Torah established? The Gemara (see Rashi) presents two options:

(1) The tanna,Rebbe, contends that shemittas kesafim applies min haTorah only when the laws of yoveil apply. Hillel held like Rebbe that shemittas kesafim is only a rabbinic rule today — since the mitzvos of yoveil do not apply until the tribes all return to their lands. Chazal have the ability to suspend rabbinically declared laws (Gittin 36a).

(2) The Torah provides batei din with the ability to declare property ownerless. This ability, called hefker beis din hefker, allowed Hillel to require borrowers to pay their debts that would otherwise have been released by the mitzvah of shemittas kesafim.

How did he?

How does a pruzbul work?

According to most rishonim, the technical way a pruzbul operates is as follows: Min haTorah, the prohibition of shemittas kesafim exists only when an individual demands payment, but not when a beis din does. This halacha is implied by the words in parshas Re’eih (Devarim 15:2): “Every creditor must release his hand from what his fellow owes him. He may not demand payment from his fellow or from his brother, because he has declared a release for Hashem.” These words teach that the prohibition of shemittas kesafim applies only to an individual, not to beis din (Sifrei). Thus, min haTorah, there is a relatively simple way to avoid violating the prohibition of shemittas kesafim. Before this law takes effect at the end of shemittah year, the creditor transfers his loans to beis din (Mishnah, Shevi’is 10:2; however, cf. Rashi, Gittin = and=, who appears to understand the topic differently), thereby authorizing the beis din to collect the debts. Now that the debts are in the hands of beis din, shemittas kesafim does not apply, and the debts can still be collected.

Min haTorah, this process requires the creditor to hand over his loan documents to the beis din. If the creditor does not have the documents, he does not give them to beis din, or the loans were not made in writing, the creditor cannot use this heter to avoid shemittas kesafim. The pruzbul allows the transfer of the debts to the beis din without physical movement of any documents, or even if there are no documents.

As the Yerushalmi expresses it, pruzbul allows transferring documents that a creditor has in Rome. (An alternative interpretation understands this passage of Yerushalmi to mean that a creditor in Israel may transfer his loans to a beis din in Rome, even though at the time of the Yerushalmi, PayPal had no business operation yet in either Israel or Italy. We will return to these two interpretations of the Yerushalmi.)

Non-written loans

Thus, pruzbul works for loans created in the presence of witnesses, even when no written contract was drawn up (Rema, Choshen Mishpat 67:19 and Sma; see Urim).

Non-pruzbul

We should note that, even without pruzbul, there are at least four ways whereby a creditor may avoid violating shemittas kesafim. Apparently, people were not utilizing these methods, and therefore Hillel created a simpler vehicle to avoid the prohibition. I will utilize an acronym BACK — whereby debts must still be paid BACK, notwithstanding the mitzvah of shemittas kesafim:

(1) Beis din

As explained above, the creditor delivers his loan documents to a beis din; collection of the debts is through beis din (Rambam, Hilchos Shevi’is 9:15; Rashi, Gittin 36a).

(2) After – payable after shemittah

Although this ruling is disputed in the Gemara, the accepted halacha is that shemittas kesafim applies only to a loan that could be collected, at least in theory, at the end of the shemittah year (Shulchan Aruch, Choshen Mishpat 67:10). Thus, a simple way for someone to lend money and avoid shemittas kesafim is to schedule the loan’s due date for after shemittah year (see Makkos 3b). Of course, by doing this, the creditor forfeits any right to collect the loan earlier. In addition, this suggestion will not help if the loan is overdue and the borrower has not been paying, whether his delay is because he is without funds or because he chooses to be a deadbeat.

(3) Condition

There is a technical way that, when the loan is originated, it can be made conditional to be payable even after shemittah ends. Because of space considerations, I am unable to explain this in the current article.

(4) Kollateralized

You are correct, it should be collateralized, but I think that you’ll remember BACK better than BACC.

At the time of the loan, the creditor can insist on receiving collateral (a mashkon) [Gittin 37a] that is worth more than the loan. Some authorities contend that shemittas kesafim does not apply even if the mashkon is worth less than the loan (Shmuel in Yerushalmi, Shevi’is; Rashi, Bava Metzia 49a; Rash, Shevi’is 10:2, in his explanation of Shavuos 44b). These authorities hold that the existence of a mashkon automatically exempts a loan from the rules of shemittas kesafim. The reason why a mashkon exempts the loan from the mitzvah of shemittas kesafim is because the loan is considered already collected.

The Shulchan Aruch cites both of the opinions I quoted, but rules, according to the first opinion, that the mashkon preempts shemittas kesafim only when it is at least as valuable as the amount loaned (Choshen Mishpat 67:12).

Paying BACK (or BACC)

Now that we know about these four options, we realize that the creditor can easily arrange matters such that shemittas kesafim is avoided. Nevertheless, Hillel realized that people were not utilizing these methods to guarantee return of their funds, but instead, they were refraining from lending money — thus violating both an aseih and a lo sa’aseh. This necessitated the new takkanah of pruzbul.

What type of beis din?

As explained above, the legal vehicle whereby a pruzbul works is that the loan is transferred to a beis din, which avoids the prohibition of shemittas kesafim. The Mishnah (Shevi’is 10:4) states: “This declaration is the essence of a pruzbul: ‘I transfer to you, dayanim xxx of community y, any loan that I am owed, such that I can collect it whenever I want to.’”

We may have noticed that beis din is involved in the din of pruzbul in two ways:

(1) The Torah exempts loans owed to a beis din from the mitzvah of shemittas kesafim.

(2) Transferring the ownership of the debt to beis din may require utilizing the principle of hefker beis din hefker, which is a legal concept that requires a beis din to implement.

This brings up a new question (Gittin 36b). The Gemara states that a pruzbul can be created only by a high-level, established beis din, such as that of the renowned amora’im, Rav, Shmuel, Rav Ami or Rav Asi. Why can only these gedolei Yisroel create a pruzbul? Because the ability to declare someone’s property ownerless, hefker beis din hefker, is not granted to just any beis din (Sma 67:36).

Technically speaking, three learned, adult, male Jews can form a beis din. For laws such as hataras nedarim, releasing someone from vows, we follow this practice. Is the same type of beis din valid for creating a pruzbul? The Gemara quoted above disagrees — not every beis din may create a pruzbul, only one in the league of Rav, Shmuel, Rav Ami and Rav Asi. This implies that even a beis din experienced in dinei Torah may not issue a pruzbul. Several rishonim, including the Rambam and Rabbeinu Tam, conclude that only an exceptionally regarded beis din may issue a pruzbul. This is also the conclusion of the Shulchan Aruch: “A pruzbul may be written only in a prominent beis din, meaning, three experts who know halachic civil law, the laws of pruzbul and shemittah and were appointed judges by the community of their city” (Choshen Mishpat 67:18).

Nevertheless, the accepted practice among Ashkenazim follows the Rosh (Gittin 4:13), who understands that the Gemara later reevaluates this decision, and that is the conclusion of the Rema (Choshen Mishpat 67:18). Common contemporary Ashkenazic practice is that the three “dayanim” who perform hataras nedarim on erev Rosh Hashanah sign someone’s pruzbul.

From a distance?

May the creditor transfer the loans to the beis din without appearing before them, by declaring in front of witnesses, “I am transferring all loans that are owed me to beis din, consisting of dayan D1, dayan D2 and dayan D3, in city C?” If you follow the Ashkenazic practice that a pruzbul may be issued by any beis din, this question is not that serious, unless you intend to spend all of Elul outside any Jewish community. However, for those who follow the Shulchan Aruch’s ruling, this is a very practical concern, since a pruzbul may be issued only by a major beis din. Must the creditor appear in front of the beis din for them to issue a pruzbul, or is it sufficient that he declare in front of witnesses that he is transferring all debts he is owed to a major beis din?

The Mordechai (Gittin #380) cites this question as a dispute between himself and Rabbeinu Yechiel, in which Rabbeinu Yechiel required the declaration to be in the presence of the beis din, whereas the Mordechai ruled that it is adequate for the creditor to declare to the witnesses that he transfers his loans to the beis din. The Shulchan Aruch mentions both opinions (Choshen Mishpat 67:19 and 21), concluding (Choshen Mishpat 67:19) that he must make this declaration directly to the beis din, an approach accepted by both the Sma and the Tumim (67:21). The Rema (Choshen Mishpat 67:20) concludes that it works even if he is not in front of beis din.

Remember Rome!

Or, more accurately, remember the passage of the Yerushalmi (Shevi’is 10:2), regarding Rome! That Yerushalmi states that a pruzbul can transfer what is nesunin beRomi, “located in Rome.” If nesunin beRomi refers to the location of the dayanim, the creditor may transfer loans to a beis din hundreds of miles from where he is, as concluded by the Mordechai and the Rema. On the other hand, if the Yerushalmi is referring to loan documents in Rome, all we can prove is that pruzbul permits the transfer of loans, without the creditor handing his documents physically to the beis din.

One pruzbul covers all

A creditor need make only one pruzbul, regardless as to how many outstanding debts and debtors he has. This is because the pruzbul transfers all the loans he is owed to the beis din.

Oral pruzbul

Must a pruzbul be written down, or can it be an oral declaration, without a written form? The Shulchan Aruch implies that, in normal circumstances, it should be a written document, whereas the Rema rules that it can be performed orally (Choshen Mishpat 67:20). Accepted custom is to make a pruzbul into a simple, written form, although the exact text may vary, often dependent on some of the halachic issues we have discussed in this article.

Postdated pruzbul

A pruzbul transfers to the beis din any outstanding debts that exist at the time that it is made. It cannot transfer a debt that does not yet exist. Therefore, if a creditor made a pruzbul on the 20^th of Elul, and then loaned someone money on the 23^rd, shemittas kesafim will take effect on this loan. As a result, a postdated pruzbul, such as one transacted on the 20^th of Elul, but dated the 29^th, is invalid, since it might be used as proof that a loan made between these two dates was transferred to beis din when it wasn’t (Mishnah, Shevi’is 10:5).

On the other hand, a predated pruzbul is perfectly valid. Dating it earlier than necessary only causes a potential loss to the creditor, since it cannot prove that he transferred to beis din a loan that took place after the date written on the pruzbul. Since the creditor would be harming only himself with such a pruzbul, a predated pruzbul is valid (Shulchan Aruch, Choshen Mishpat 67:32 and Sma there #54).

Borrowing tenants

The Mishnah states that a pruzbul is written only when someone owns land (Shevi’is 10:6). Who must own land? The borrower must be someone who owns or has a right to some land.

However, this does not mean that a creditor cannot create a pruzbul to collect from someone who rents an apartment. A tenant has a right to his apartment, and this is adequate “land ownership” for a pruzbul to be effective. Even if the only land right a person has is that he has borrowed an area upon which his stove rests, he has enough “land ownership” to be included in a pruzbul.

Potential lenders solicited by someone homeless, who are concerned that a pruzbul will not guarantee their loan – be aware that Hillel took you into consideration, although the explanation as to how this pruzbul needs to be made is beyond the scope of this article. If you have loaned money to someone who has no rights to any landed property, ask your rav or posek how to make your pruzbul credit-worthy.

Why land?

Why does a pruzbul work only if the debtor has land?

According to Rashi (Gittin 37a s.v. ela), this is because most people who borrow money have land to serve as understood collateral. Any serious loan will require some means of guaranteeing collection, and chattel can easily “disappear.” Therefore, a loan made for a borrower who has no real estate at all is so uncommon that Hillel felt no need to make a pruzbul to cover this situation.

The Rash (Shevi’is 10:6) offers a different suggestion why land ownership is an essential component for a pruzbul: A loan turned over to beis din is exempt from shemittas kesafim since it is as if beis din has already collected the debt — there is nothing preventing them from taking the land for collection.

Lost my pruzbul

The Mishnah (Kesubos 89a) implies that a creditor who comes to beis din after shemittah year and claims that he made a pruzbul must bring evidence that he did so. However, the Gemara (Gittin 37b) notes that the amora’im,Rav and Rav Nachman, followed the opinion of a different tanna, in a beraisa, who disagreed. Most rishonim accept their ruling that someone who claims to have made a pruzbul may collect his debt after shemittah (see also Shulchan Aruch, Choshen Mishpat 67:33). The reason is that we assume that a frum Jew would not violate the Torah when he can accomplish something in a permitted way (Sma 67:55). According to all authorities, the lender may not claim to have made a pruzbul if he did not, and it is theft to do so. It also violates the mitzvah of shemittas kesafim, releasing his loans at the end of shemittah year.

Conclusion

Why do people view loaning money as an optional “good deed” rather than as a commandment? The Chofetz Chayim (Ahavas Chesed 2:8) raises this question and mentions several excuses people make to avoid lending money. After listing these reasons, the Chofetz Chayim proceeds to refute each one of them. Simply put, the answer to this question is an old Yiddish expression, Ven kumt tzu gelt, es iz an andara velt, “When dealing with money, people approach matters in a completely different way,” and, if I might add my own commentary, often not in a very rational way. People find it difficult to part with their money, even temporarily. This is precisely why one receives such immense reward for lending. As Pirkei Avos teaches us, lefum tza’ara agra, “we are rewarded in direct relationship to the level of discomfort we feel when observing the mitzvah.”

At the end of parshas Vayikra, there is discussion about someone who is dishonest in his dealings.

It had already been a really tough day. Now, on top of that, Mrs. Gartenhaus (all names in this story have been changed) was very unhappy with the cab driver she had hailed. Aside from his discourteous behavior, she sensed a certain shadiness to his personality. She just couldn’t wait to get home and out of his vehicle.

To compound everything, on her way home Mrs. Gartenhaus realized that she had no more money in her wallet — and she also realized that Mr. Gartenhaus would not be home from his chavrusa for a while. She really did not want to disturb his learning, just because she had forgotten to bring enough money for the cab home. But what was she to do?

She wondered whether one of the neighbors might be home, and whether she could remember their phone numbers. Sure enough, Mrs. Horowitz’s phone number popped into her head — if only she was home. Mrs. G. dialed the number on her cell phone, and, Baruch Hashem, Mrs. Horowitz answered! Mrs. G. quickly explained her predicament, and Mrs. Horowitz answered, “No problem. I have a 100-shekel bill in my wallet. That will be more than enough for your fare.”

Mrs. G. breathed an audible sigh of relief. “The fare should actually not be more than 40 shekalim, so I don’t need to borrow that much,” she told Mrs. Horowitz.

“I happened to check my wallet this morning and noticed that I have only one single 100-shekel bill,” Mrs. H. replied. “But feel free to borrow it. I have to go to the bank later today, anyway, to withdraw some money. I’ll send my daughter Chanie outside to meet your cab.”

Mrs. Horowitz asked 13-year-old Chanie to fetch the bill from her wallet and meet Mrs. Gartenhaus’s cab. Mrs. G., who was very relieved to escape the sleazy driver’s vehicle, paid little attention to the bill that she transferred from Chanie’s hand to the cabby’s outstretched paw. Before receiving her change, she gratefully began to exit the cab.

“One minute,” the driver shouted gruffly, brandishing a 20-shekel bill in his hand, “you owe me another 20 shekalim!”

Mrs. Gartenhaus was at a loss. She had assumed that Chanie gave her the 100- shekel note her mother promised, but maybe there was some mistake. In the meantime, Chanie had returned home, the driver was hissing, and Mrs. G. just wanted to get home and climb into bed.

Noticing one of her neighbors on the curb, she embarrassingly called out the window, “Do you perhaps have 20 shekels I can borrow?” Having successfully borrowed the additional 20 shekels, she paid the cabby, and struggled into her house. Meanwhile, she was trying to figure out what went wrong in her communication with her wonderful neighbor, Mrs. Horowitz. And only later did she realize that she should have taken down the cabby’s license number and the name of his company.

After resting a while, she called Mrs. Horowitz to ask her if she could send one of her children over in order to repay her loan. “By the way, how much money did you send with Chanie?” she inquired.

“I sent 100 shekel,” came the swift reply. “Why? Was there some problem?”

Mrs. G. told Mrs. Horowitz what had happened. “I’ll check with Chanie, but I am pretty certain that all I had was one 100-shekel bill in my wallet.”

Chanie confirmed that she had found only one 100-shekel bill in the wallet.

How much must Mrs. Gartenhaus pay back to Mrs. Horowitz?

Does Chanie have any legal responsibilities in this case?

Mrs. Horowitz called Rav Cohen to ask how much Mrs. Gartenhaus owes her. Although it might seem like an open-and-shut case, the halacha is anything but obvious, as we will see.

Rav Cohen mulled over the case, thinking over the complicated halachic topics this event encompasses. Clearly, both women want to do what is correct. Is it clear that Mrs. Gartenhaus owes 100 shekalim?

Legally, in this case, the claimant, usually called the plaintiff, is Mrs. Horowitz. She is placing a claim that Mrs. Gartenhaus borrowed 100 shekalim that Chanie delivered. Mrs. Gartenhaus’s response is that she does not know how much money she borrowed. It might seem that Mrs. G. has a very weak defense: after all, Mrs. Horowitz is making a definite claim that Mrs. Gartenhaus owes her 100 shekalim, while Mrs. Gartenhaus’s only response is that she did not pay attention.

Halachically, Mrs. Horowitz’s definite claim is called a bari, a person with a certain claim. Mrs. Gartenhaus response that she is unaware how much she owes makes her a shema, a defendant who is uncertain. This case is the subject of a Talmudic dispute. Here is one case where this question is discussed:

Reuven borrowed a cow from Shimon and also rented a different cow. One of the cows died in a way that would make Reuven liable if he had borrowed it, but not liable to pay if he had rented it. Unfortunately, Reuven does not remember which cow was borrowed and which was rented, but Shimon is certain that the dead cow is the one that was borrowed and that Reuven is obligated to pay. Must Reuven compensate Shimon for the dead cow?

The halacha is that bari ve’shema lav bari adif, the certain claim of the bari is insufficient, on its own, to win the case. This rule is true even in a case where the shema should have known for certain whether the claim against him is valid, like in our situation (Bava Metzia 97b). Therefore, Reuven does not have to pay for the dead cow.

Applying the principal to our case, it could be that Mrs. Horowitz would have to prove that she loaned 100 shekalim in order to require Mrs. Gartenhaus to pay the full amount. But this is true only when the claim is challenged.

Ah, but you’ll tell me, Mrs. Horowitz has a witness on her side which Shimon did not have. Chanie can testify that the loan was indeed 100 shekalim!

By now, the yeshiva minds among us are racing with valid reasons why Chanie’s testimony is insufficient to prove her mother’s case. Firstly, a single witness is not enough. Secondly, Chanie is related to one of the interested parties. Furthermore, Chanie herself is an interested party, nogei’a be’eidus, in the litigation. If she denies that she received a 100-shekel bill from her mother, she exposes herself to a lawsuit from her mother that she received money, as an agent, that she cannot account for. Although the likelihood of Mrs. Horowitz suing her own daughter for 100 shekalim is slim, it is still sufficient reason for Chanie to be considered a nogei’a be’eidus, making her testimony inadmissible.

Mrs. Horowitz has not yet exhausted her legal approaches. She may still stake a claim against Mrs. Gartenhaus, based on either of the following reasons:

1. Modeh bemiktzas. Mrs. Gartenhaus agrees that she borrowed money, but is challenging the amount of the loan. The Gemara calls this modeh bemiktzas, acknowledging part of a claim. The Torah requires someone who acknowledges part of a claim, and denies part, to swear an oath he does not owe the balance (Bava Metzia 3aet al.). If he does not want to swear, he must pay the balance of the claim.

2. Shevuas heses. Based on Mrs. Horowitz’s definite claim that Mrs. Gartenhaus owes her 100 shekalim, Mrs. H. can insist that Mrs. G. swear an oath denying that she owes money. The Gemara calls this shevuas heses, an oath to discourage defendants from denying claims that lack sufficient evidence (Shevuos 40b; Shulchan Aruch, Choshen Mishpat 87:1).

We will examine each of these legal arguments. In the first argument, modeh bemiktzas, Mrs. Horowitz is claiming 100 shekalim. Mrs. Gartenhaus acknowledges that she owes 20 shekalim, but is uncertain about the remaining 80 shekalim. Thus, to fulfill the Torah’s requirement to swear an oath, Mrs. Gartenhaus would have to swear that she definitely does not owe more than 20 shekalim, something she cannot do. What is the halacha in this situation?

The Gemara discusses this exact case: Reuven claimed that Shimon owed him 100 dinarim. Shimon responds, “I know that I owe you fifty, but I do not know about the other fifty.” Is Shimon obligated to swear on the remaining balance? And if so, what does he swear?

The Gemara rules that since Shimon cannot swear that he does not owe the balance, he is obligated to pay the full 100 dinarim (Bava Metzia 98a).

Thus, Mrs. Horowitz seems to have her case wrapped up. Mrs. Gartenhaus cannot swear that she definitely does not owe 80 shekalim. Consequently, she should be required to pay the full 100 shekalim.

Except for one detail: Has Mrs. Gartenhaus paid back the 20 shekalim? If she already paid back 20 shekalim, the case is halachically different.  Now, Mrs. Horowitz is claiming 80 shekalim and Mrs. Gartenhaus is denying the entire claim. Thus, Mrs. G. is no longer modeh bemiktzas, someone who acknowledges part of the claim, but kofeir hakol, someone denying the entire claim. Although it may seem that there is not much difference between the two scenarios, halachically someone who acknowledges part of a claim must swear an oath min haTorah, whereas someone who denies the entire claim does not. The rationale for this distinction is beyond the scope of this article (Bava Metzia 3a).

This is where the other type of oath, shevuas heses, comes into play. Since Mrs. Horowitz claims that Mrs. Gartenhaus definitely owes her 80 shekalim, she can insist that Mrs. G. swear an oath about the claim.

But one minute! Either way, there would be a technical responsibility to swear an oath. What is the difference whether Mrs. Gartenhaus is being asked to swear an oath because of modeh bemiktzas or as a shevuas heses? Either way, there is an oath that she cannot swear!

However, there is a big difference in halacha between the two oaths, which makes a practical halachic difference in our case. If the oath is min haTorah, the fact that Mrs. G. cannot swear for certain to deny the claim works against her, as we explained above. However, if the oath is of the heses variety, which is only mi’derabbanan, it is sufficient for Mrs. Gartenhaus to swear that she is unaware how much she owes (Shulchan Aruch, Choshen Mishpat 87:1). Thus, Mrs. Horowitz cannot insist that Mrs. Gartenhaus pay her the full sum. She must be satisfied with 20 shekalim and an oath from Mrs. Gartenhaus that she does not know how much she borrowed.

Rav Cohen reflected over the fact that batei din do not usually insist on oaths, but instead will suggest some form of compromise. Not that these two well-meaning ladies were about to pursue this matter in a beis din setting — they merely want to do what is halachically correct.

The Rav asked Mrs. Horowitz to have Mrs. Gartenhaus give him a phone call.

The phone rings. Mrs. G. is on the phone. Rav Cohen asks her what happened, to see if the versions substantiate one another. They do. And it is also clear that Mrs. Gartenhaus wants to do what is correct.

“Is it true that you told Mrs. Horowitz that I don’t have to pay her back?” asked Mrs. G. “I feel really guilty about that. I can’t imagine that just because I didn’t pay attention to how much money Chanie gave me that she should be out 80 shekalim.”

“Actually, I was simply pointing out that the halacha is not obvious,” replied the Rav. “However, someone who wants to be certain that he has done the mitzvah correctly (ba latzeis yedei shamayim) should pay back a full 100 shekalim (Bava Kamma 118a). Thus, the correct thing to do is to offer her the full amount.”

Mrs. Gartenhaus paid the money in full, and, as you can imagine, she never heard from the cabby again. Besides the halachic principles gleaned from her story, an added lesson is to check before handing over a bill, especially to an unscrupulous cab driver!

Mr. Gomel Chessed shares with his rav, Rav Chacham,the following predicament: “I loaned someone money, but I did not pester him for payment when he told me that things were tough. Recently, I contacted him to ask if he is in any position to pay me back. He replied that he was forced into bankruptcy and, thereby, absolved of all his debts. Does he, indeed, no longer owe me for the loan?”

Gomel’s rav explains that although the Gemara and the Shulchan Aruch do not recognize a concept called bankruptcy, there are authorities who contend that, at least in some circumstances, halachah requires that we respect a bankruptcy court’s decision. Gomel is eager to hear the full explanation, so his rav provides him with some background material to read, and they make an appointment to discuss the matter at length.

Gomel truly enjoyed researching the topic, and discovered that he also wanted to know the related subjects. As a result, he became somewhat of an expert on much of the halachic material germane to his question.

Responsibilities of a Borrower

One of the first topics Gomel researched was the extent to which a borrower must go to pay his debts. He was surprised to discover how strongly halachah requires someone to repay his debts and to make his payments on time. In addition, it is strictly forbidden to claim that one is unable to pay his debts when he can, and it is similarly forbidden to hide money so that a creditor cannot collect. All this is true even if the creditor is very wealthy.

One may not borrow money that he does not think he will be able to repay. According to some authorities, money borrowed under a false pretense that the borrower intends to repay when he does not, is considered stolen, and not borrowed, funds. The halachic ramifications of this distinction are beyond the scope of this article.

If a debtor’s loan is due and he cannot pay, halachah requires that he sell his house, his furniture and his other household items, if necessary, to repay the debt, unless he can convince his creditor either to forgive the debt or, at least, to wait longer for payment (Graz, Hilchos Halvaah 1:5).

Since the debtor must use whatever money he has available to pay his debt, he is required to trim his expenditures so that he can pay his creditor. Until his debt is repaid, he may not make significant contributions to tzedakah (Sefer Chassidim #454). Furthermore, he may not purchase a lulav and esrog, but, instead, must fulfill the mitzvah by borrowing them from someone else (see Pischei Teshuvah, Choshen Mishpat 97:8). It goes without saying that luxuries and vacations are out. Someone who uses his money to purchase non-essential items when he has an overdue debt demonstrates a lack of understanding of the Torah’s priorities. One who squanders money and therefore is unable to repay his loans is called a rasha (Rambam, Hilchos Malveh 1:3).

Systematic Collection

Having researched how responsible a debtor must be, Gomel next studied the following topic: If a debtor, unfortunately, owes more money than he can pay, how does the halachah decide on the division of the debtor’s limited financial resources among his creditors?

Gomel discovered that the halachos governing who collects first are extremely complicated. He also discovered that in a case where a person’s financial resources are insufficient to cover his debts, halachah views the priorities of who receives, and how much, very differently from civil law. Here are some basic ideas.

The Gemara works with a concept called shi’bud, by which most debts are automatically secured with property that the debtor owned at the time he created the obligation. Under this system, if a debtor defaulted on an obligation, a creditor who exhausted all means of collecting directly from the debtor’s holdings could collect these secured debts from real properties that the debtor had owned at the time of the loan and subsequently sold. The system in place allowed potential purchasers to find out whether a property had a lien on it prior to purchasing it. (This would loosely parallel what we call today a “title search,” performed to ascertain ownership of a property and whether there are any liens on it.) The potential lien on all the properties of a debtor encouraged people to pay their debts so that they could sell their properties more easily, and also enabled people to borrow investment capital.

Who Collects First?

Under the Gemara’s shi’bud system, when there are two or more claims on a property whose value is less than the outstanding debt, the creditor with the earliest claim collects as much as he can, and, after his claim is paid, the creditor with the next earliest claim collects, and so on (Shulchan Aruch, Choshen Mishpat 104:1).

When Gomel asked contemporary halachic authorities if this system is used today, he was told that one would not be able to collect from such properties, unless they were mortgaged.

Why did the halachah change?

Rav Moshe Feinstein explains that since a creditor does not expect to be able to collect from properties that have been sold by the debtor, he does not acquire shi’bud on them (Shu”t Igros Moshe, Choshen Mishpat 2:62).

Bad Talmudic Debts

When there is no shi’bud claim on any properties, under the Gemara’s system, the outstanding creditors collect, but not in proportion to the amount that each is owed. According to most authorities, we still follow the FIFO (first in, first out) rule of paying the earliest claim first, although others rule that everyone is paid equally, according to the availability of resources (Shulchan Aruch, Choshen Mishpat 104:13 and Sm”a).

The latter approach also results in a major difference between the Gemara’s system and the modern approach. Under the modern approach, the court calculates the ratio of available resources to debt, and pays all creditors a percentage of their debt based on the result. According to halachah, if someone owes $500,000 to 50 different people but has only $5,000 with which to pay, and each individual is owed at least $100, then they each collect $100, regardless of the actual amount that each one is owed.

By now, Gomel has studied much of the Gemara and commentaries on the topic of debt collection, and he has a good idea of how bad debt was collected in the time of the Gemara. After reviewing his studies with Rav Chacham, Gomel was ready to understand how and if bankruptcy fits into a halachic system. He soon discovered that he now needs to master a different, complicated concept of halachah called dina demalchusa dina.

Dina Demalchusa Dina

In the time of the Gemara, most countries and governments were kingdoms. This meant that the people living in an area recognized one individual as being responsible to maintain law and order within the country and to protect the citizenry from external enemies and greedy neighbors. Without a government, people are in constant danger from the chaos that occurs when there is no respect for a central authority. To quote the Mishnah in Pirkei Avos (3:2), “Pray for the peace of the kingdom, for if people are not afraid of it, one man would swallow another alive.” Anyone who has seen or read of the mass looting that transpires when there is a breakdown of authority knows exactly what this means.

The king or government requires an army to protect the country from its external enemies, a police force to uphold law and order, and royal palaces and government offices that are well maintained, so that the king’s authority is respected. All this requires funding, and the people realize that they need to pay taxes so that the king and/or government can protect them (see Rashbam, Bava Basra 54b s.v. VeHa’amar). The halachah of dina demalchusa dina recognizes that the king and his properly appointed agents have the right to collect taxes (Nedarim 28a).

Din Melech

When the tribes of Israel approached their prophet, Shmuel, requesting that he appoint a king, Shmuel attempted to dissuade them by noting the tremendous power that a king has:, saying: He will draft the most talented sons to till his fields, harvest his crops and perform other services; he will draft their daughters as perfumers, bakers and cooks; and he will raise high taxes (Shmuel I 8:11-18). The Gemara (Sanhedrin 20a) cites a dispute as to whether a Jewish monarch has the extensive authority that Shmuel described, or if Shmuel was simply warning the people in an attempt to dissuade them from having a king. The Rambam (Hilchos Melachim 4:1) and most authorities rule that the king, indeed, does have this authority.

Some poskim understand that a non-Jewish king also draws his authority based on this concept of din melech. That is, the Torah reserved the rights described by the prophet Shmuel for any monarch. (Even those who contend that Shmuel was merely warning the people, and that the king does not have this extensive authority, accept the concept of dina demalchusa dina; they simply do not consider the din melech of Shmuel to be the source for the law of dina demalchusa dina.)

Democratic Taxes

Although the early authorities discuss dina demalchusa dina primarily in terms of the rights of a king, most later authorities understand that this halachic power exists, equally, in a democracy (see Shu”t Yechaveh Daas 5:63).

Gomel discovered that the vast majority of halachic authorities regard dina demalchusa dina as a Torah-mandated concept (see Shu”t Dvar Avraham 1:1; Avnei Meluim 28:2; Shu”t Chasam Sofer, Yoreh Deah #314), although  a minority opinion contends that dina demalchusa dina was introduced by Chazal (Beis Shemuel, 28:3).

Many authorities rule that a king may not arbitrarily create new taxes; he may collect only that which has been established previously (Ritva, Nedarim 28a; see lengthy list in Encyclopedia Talmudis, Volume 7, page 318, footnote 559). Why is this true? When people appointed the original king to protect them, they accepted certain taxes with which to pay him for his “services.” According to these rishonim, neither this king nor his successors have a right to create new taxes or increase taxes arbitrarily, without the consent of the governed.

Traffic and Safety Regulations

Thus far, we have seen that dina demalchusa dina governs the right of the king or the government to collect taxes. Dina demalchusa dina also obligates us to obey rules of the government, such as the prohibitions against smuggling and counterfeiting. However, dina demalchusa dina goes much further. Some authorities maintain that dina demalchusa dina requires everyone to obey government-created rules that are clearly for the common good (Ramban, Bava Basra 55a). One may argue that this includes rules governing traffic laws, sanitation, safety and health. Those who do not agree that dina demalchusa dina extends this far feel that dina demalchusa dina is limited to matters that more directly affect the government (see Maggid Mishnah, Hilchos Malveh 27:1). However, all opinions agree that dina demalchusa dina applies to matters that contravene the authority of the governing parties (Igros Moshe op. cit.). The exact extent to which this is applied in practice will affect Gomel’s original question: whether dina demalchusa dina applies to bankruptcy law.

No Government Influence

Which areas of halachah are not subject to dina demalchusa dina?

Dina demalchusa dina does not replace the civil laws of the Torah (the laws of Choshen Mishpat) that govern the relationships between Jews (Shu”t Harashba 3:109, quoted by Beis Yosef, Choshen Mishpat end of Chapter 26; Shach, Choshen Mishpat 73:39). For example, dina demalchusa dina does not affect the laws of inheritance. These laws are governed by the Torah’s laws of yerushah.

Similarly, the laws of damages (nezakin), the laws of shomrim – responsibility for taking care of someone else’s property – and the property laws involved in marriage are all areas of halachah in which Jews are required to follow the laws of the Torah. Therefore, when a Jew lends an item to another, the laws governing his responsibility are those of the Torah, not the local civil code. This is because there is no infringement on the government’s authority when people make their own arrangements regarding how to manage these areas of their lives (Igros Moshe).

Government Influence

On the other hand, certain areas of contract law are heavily influenced by dina demalchusa dina. For example, the laws of employee relations are governed by local custom (Yerushalmi, Bava Metzia 7:1), which is usually influenced greatly by civil law.

What about Bankruptcy?

As I wrote above, the Gemara and the Shulchan Aruch do not mention the concept of bankruptcy. Gomel began to research if anyone discusses whether halachah recognizes the laws of bankruptcy, under the laws of dina demalchusa dina. Indeed, he discovered a dispute among great twentieth-century authorities regarding whether dina demalchusa dina applies to the laws of bankruptcy. In a responsum, Rav Moshe Feinstein rules that dina demalchusa dina applies only to matters in which the government takes an interest, because they may affect the stability of the country. For example, if the country does not have sound markets, this could create problems that the government wants to avoid. Therefore, the government has a halachic right under dina demalchusa dina to insist that its laws governing stable markets are followed.

Rav Moshe concludes that the laws of bankruptcy are within the parameters of dina demalchusa dina, since the government has a right to insist that a consistent rule of law be applied throughout the country regarding the discharge of bad debts.

In the case brought before Rav Moshe, a company had gone bankrupt, and the directors had paid one of its creditors, in violation of the bankruptcy rulings. The question was whether the individual was required to return the money that he had been paid because of the lahachah of dina demalchusa dina.

Rav Moshe ruled that, if the company had already filed for bankruptcy when this money was paid, the creditor is halachically required to return the money. This is because dina demalchusa dina establishes the regulations of how a person or entity that has filed for bankruptcy may pay its debts.

On the other hand, we find responsa from two prominent European authorities, Rav Yitzchak Weiss (Shu”t Minchas Yitzchak 3:134), who was then the av beis din of Manchester (and later the Rosh Av Beis Din of the Eidah HaChareidis in Yerushalayim), and from Rav Yaakov Breisch of Zurich, Switzerland (Shu”t Chelkas Yaakov 3:160). (It is interesting to note that these two great poskim were mechutanim.) From the limited description of the cases that each responsum contains, it seems that they were asked about the same situation:

Reuven advanced Shimon a personal loan and Shimon subsequently declared bankruptcy. As required by law, Shimon notified all his creditors, Reuven included, that he had filed for bankruptcy protection and that Reuven had the right to protest the bankruptcy arrangements. Reuven did not protest the bankruptcy proceedings. Ultimately, the court ruled that Shimon was required to pay thirty cents per dollar of debt.

Subsequently, Reuven sued Shimon in beis din for the entire loan. Shimon contended that he was not required to pay Reuven more than the thirty cents to the dollar, as per the bankruptcy court’s ruling. Reuven, the creditor, claimed that he had never forgiven any part of the loan. He argued that he did not protest the bankruptcy proceedings for several reasons, among them that he was unaware that a personal loan without interest is included in bankruptcy proceedings.

The rav who was asked the shaylah referred it to these well-known poskim, both of whom contended that dina demalchusa dina does not apply to bankruptcy procedures. In their opinion, dina demalchusa dina never supplants an area of halachah in which the Torah provides its own guidelines.

They do agree that if there was evidence that Reuven had accepted the court’s ruling, he would no longer be entitled to full payment, because he had been mocheil, forgiven, the balance of the loan. Once someone was mocheil a loan or part thereof , he cannot subsequently claim it. However, in the situation at hand, there was no evidence that Reuven was mocheil the balance of the loan.

It would seem from Rav Moshe Feinstein’s responsum that he would have ruled differently, contending that once the court declared Shimon bankrupt, Reuven would have been obligated to honor the court’s decision because of dina demalchusa dina.

At this point, Gomel sat down to discuss with Rav Chacham whether his own debtor could claim protection for the balance of his loan, since he had declared bankruptcy. According to the Chelkas Yaakov, the Minchas Yitzchak, and other authorities, a debtor has no basis for claiming bankruptcy protection. On the other hand, in certain circumstances, Rav Moshe might contend that the debtor need not repay more than the court has ruled.

Conclusion

Lending money is a valuable mitzvah. When someone fulfills this precious mitzvah of lending money to a fellow Jew, he is not donating a gift. As the Tanna Rabbi Shimon notes in the second chapter of Pirkei Avos, “the evil path from which a person should distance himself” can be described by the words of Dovid Hamelech: The wicked borrow and do not repay; whereas the righteous is gracious in his giving. Someone who borrows must always have a plan as to how he intends to return the funds.

Although it is a very big mitzvah to lend money, some people
are reluctant to do so because they know of loans that proved difficult to collect.
Must you lend someone money if you are not sure it will ever be repaid? What do
you do if you lent money to someone who seemed very honest and sincere, but now
that it comes time to repay, he informs you that he is penniless? What may you
do and what may you not do to collect your money? How can you guarantee that
you get your money back?

Our goal this week is to address these questions.

THE MITZVAH OF LENDING MONEY

The Torah requires us to lend money to a poor Jew who needs it (Rambam, Hilchos Malveh 1:1). This is stated in the pasuk, “Im kesef talveh es ami, es he’ani imach – When you lend money to My people, to the poor person among you” (Shemos 22:24). Chazal explain that the word “Im” in this pasuk should not be translated as “If,” which implies that it is optional, but as a commandment, “When you lend…” (Mechilta). Poskim even discuss whether we recite a bracha on this mitzvah, just as we recite one on tefillin, mezuzah and other mitzvos (Shu”t HaRashba #18). Although the halacha is that we do not recite a bracha, the question itself shows us the importance of the mitzvah of lending money.

It is a greater mitzvah to lend someone money, which maintains his self-dignity, than it is to give him tzedakah, which is demeaning (Rambam, Hilchos Malveh 1:1). There is a special bracha from Hashem to people who lend money to the poor.

I should not become upset if a poor person returns to borrow money from me shortly after repaying a previous loan. My attitude should be similar to a storekeeper: “Do I become angry with a repeat customer? Do I feel that he is constantly bothering me?” Similarly, one should not turn people away without a loan, but rather view it as a new opportunity to perform a mitzvah and to receive additional brachos (Ahavas Chesed 1:7).

One should also lend money to wealthy people who need a
loan, but this is not as great a mitzvah as lending to the poor.

Someone with limited available funds and has requests for
loans from family members and non-family members, and cannot lend to both,
should lend to family members. Similarly, if he must choose to whom to lend, he
should lend to a closer family member rather than to a more distant one.

By the way, one may lend money to a poor person with the
understanding that if the borrower defaults, the lender will subtract the sum
from his tzedakah–maaser calculation (Pischei Choshen,
Volume 1, p. 4).

WHAT IF I KNOW THE BORROWER IS A DEADBEAT?

I am not required to lend money if I know that the borrower
squanders money and does not repay (Shulchan Aruch, Choshen Mishpat
97:4). It is better not to lend if I know that the borrower will squander the
money and probably not pay it back.

THE RESPONSIBILITIES OF THE BORROWER

Someone who borrows money must make sure to pay it back. One
may not borrow money that he does not think he will be able to repay. A person
who squanders money and therefore does not repay his loans is called a rasha
(Rambam, Hilchos Malveh 1:3).

The borrower is required to pay his loans on time. If his loan
is due and he cannot pay them, he is required to use his household items, if
necessary, to pay his debt (Nesivos 86:2; Graz, Hilchos Halvaah
1:5). Similarly, he may not make significant contributions to tzedakah (Sefer
Chassidim #454). He may not purchase a lulav and esrog if he owes money
that is due; instead, he should borrow someone else’s (see Pischei Teshuvah,
Choshen Mishpat 97:8). He must use whatever money he has available to
pay his debts.

It is strictly forbidden to pretend that he does not have
money to pay his debts or even to delay paying them if he does have the money,
and it is similarly forbidden for him to hide money so that the lender cannot
collect. All this is true even if the lender is very wealthy.

COLLECTING BAD DEBTS

Most people who borrow are careful to repay their debts and
do so on time. However, it happens occasionally that someone who intended to
pay back on time is faced with circumstances that make it difficult for him to
repay.

There is a prohibition in the Torah, “Lo siheyeh lo
k’nosheh – Do not behave to him like a creditor” (Shemos 22:24). Included
in this prohibition is that it is forbidden to demand payment from a Jew when I
know that he cannot pay (Rambam, Hilchos Malveh 1:2). The lender
may not even stand in front of the borrower in a way that might embarrass or
intimidate him (Gemara Bava Metzia 75b; Rambam, Hilchos Malveh
1:3).

However, if the lender knows that the borrower has resources
that he does not want to sell, such as his house, his car, or his furniture, he
may hassle the borrower since the borrower is halachically required to sell
these properties in order to pay his loan. (See Shulchan Aruch, Choshen
Mishpat 97:23 for a list of which items he must sell to pay his debt.)
Furthermore, the lender may sue in beis din for the right to collect
these items as payment.

(Technically, it is not the borrower’s responsibility to
sell the items and bring the cash to the lender; he may give the items to the
lender as payment. The lender must then get a beis din or a panel of
three experts to evaluate the property he has received. If he needs to hire
experts to make the evaluation, the expenses are added to the debt. Of course,
the lender and borrower can agree to whatever terms are mutually acceptable
without involving expert evaluation, provided that no ribbis [interest]
prohibition is created. The vast subject of ribbis is beyond the scope
of this article.)

The borrower is in a very unenviable position. He owes money
that he would like to pay, but he is overwhelmed with expenses and he simply
does not earn enough money to pay all his creditors. He knows he could sell his
house or his furniture to pay up, but he really does not want to do that to his
family. He should try to appease the lender in whatever way he can (for
example, by asking for an extension) and he should certainly try to find other
sources of income and figure out how to trim his expenses. But he should
realize that he is obligated even to sell his household goods to pay his
creditors. Someone who uses his money to purchase items that are not absolutely
essential instead of paying back money that is overdue demonstrates a lack of
understanding of the Torah’s priorities.

The lender may not enter the borrower’s house to seize
collateral or payment. Some poskim contend that the lender may seize
property that is not in the borrower’s house or on his person (see Pischei
Choshen, Vol. 1, pg. 96). Furthermore, there are poskim who rule
that if the borrower has the means to pay but isn’t paying, the lender may
enter the borrower’s house and take whatever he can (Shu”t Imrei Binah, Dinei
Geviyas Chov chapter 2; Pischei Choshen, Vol. 1, p. 100). One
should not rely on this approach without first asking a shaylah.

If the borrower claims that he has absolutely nothing to pay
with, the beis din can require him to swear an oath to that effect (Rambam,
Hilchos Malveh 2:2).

A lender who feels that the borrower is hiding money or
property may not take the law into his own hands to collect, but may file a
claim in beis din. If the lender feels that the borrower will not submit
to beis din’s authority, he should ask the beis din for
authorization to sue in secular courts – but it is forbidden for him to sue in
a secular court without first receiving halachic approval.

HOW CAN I GUARANTEE THAT I GET MY MONEY BACK?

As most of us have no doubt experienced at one time or
another, it is not pleasant to be owed money that is not repaid. The lender is
entitled to be repaid.

Is there a way that I can lend money and guarantee that I
get in back?

First of all, the lender must make sure that he can prove
the loan took place. This is actually a halacha; it is forbidden to lend
money without witnesses or other proof because of concern that this may cause
the borrower to sin by denying that the loan exists (Bava Metzia 75b).

All of this is protection only against a borrower denying
that he borrowed, which is fortunately a rare occurrence. What we want to explore
is ways that the lender can fulfill his mitzvah of lending to a needy person
while making sure that the loan does not become permanent.

CO-SIGNERS

The most common method used to guarantee the repayment of a loan is by having someone with reliable finances and reputation co-sign for the loan. In halacha, this person is called an areiv. In common practice, if the borrower defaults, the lender notifies the co-signer that he intends to collect the debt. Usually what happens is that when the lender calls the co-signer, suddenly the borrower shows up at the door with the money.

There are several types of areiv recognized by halacha. The most common type, a standard co-signer, is obligated to pay back the debt, but only after one has attempted to collect from the borrower. If the borrower does not pay because he has no cash, but he has property, the areiv can legitimately claim that he is not responsible to pay. The lender would need to summon the borrower and the areiv to beis din in order to begin payment procedures. Most people who lend money prefer to avoid the tediousness this involves.

One can avoid some of this problem by having the co-signer
sign as an areiv kablan. This is a stronger type of co-signing, whereby
the lender has the right to make the claim against the co-signer without suing
the borrower first.

The primary difficulty with this approach is that it might
make it difficult for the borrower to receive his loan, since many potential
co-signers do not want to commit themselves to be an areiv kablan.

ANOTHER APPROACH

Is there another possibility whereby one can still provide
the chesed to the potential borrower and yet guarantee that the money
returns?

Indeed there is. The Chofetz Chayim (Ahavas Chesed
1:8) suggests that if you are concerned that the proposed borrower may default,
you can insist on receiving collateral – a mashkon to guarantee payment.

Having a loan collateralized is a fairly secure way of
guaranteeing that the loan is repaid, but it is not totally hassle-free. There
are three drawbacks that might result from using a mashkon to guarantee
the repayment of the loan. They are:

1. Responsibility for the mashkon.

2. Evaluation of the mashkon.

3. Converting the mashkon into cash.

1. Responsibility for the mashkon.

When the lender receives the mashkon, he becomes
responsible to take care of it. If it is lost or stolen, the value of the
collateral will be subtracted from the loan (Shulchan Aruch, Choshen
Mishpat 72:2). If the collateral is worth more than the loan, the lender
might be required to compensate the borrower for the difference. (See dispute
between Shulchan Aruch and Rama, ibid.) However, the creditor is not
responsible for the mashkon if it is lost or damaged because of
something that halacha considers beyond his responsibility.

2. Evaluation of the mashkon.

When keeping the collateral to collect the debt, the mashkon
must either be evaluated by a panel of three experts before it can be sold (Shulchan
Aruch, Choshen Mishpat 73:15 and Ketzos), or must be sold
with the involvement of beis din (Shach), to protect the borrower’s
rights. Some creditors find this step tedious.

However, there are methods whereby one can use a mashkon
to guarantee a loan and avoid having the mashkon evaluated afterward.

When arranging the loan, the lender tells the borrower of
the following condition: If the loan is not paid when due, the buyer agrees to
rely on the lender’s evaluation of its worth (Pischei Choshen, Vol. 1,
pg. 145).

An alternative is for the lender to tell the borrower: If
you do not pay by the day the loan is due, then retroactively this is not a
loan but a sale. At that point, the collateral becomes mine in exchange for the
value of the loan. This is permitted even if the mashkon is worth far
more than the loan, and does not involve any violation of ribbis
(prohibited charging of interest), since, retroactively, a sale took place
rather than a loan (Shulchan Aruch, Choshen Mishpat 73:17).

3. Converting the mashkon into cash.

PROPER ATTITUDE TOWARD THE MITZVAH

At times, lenders have asked me for a method whereby they
can be certain to get their money back, and I have suggested the collateral
method. Sometimes I receive the following response: I don’t want to be bothered
with selling the mashkon to get my money back. If I think the borrower
is a risk, then I would rather not lend to him.

Do we have the same attitude toward other mitzvos we
perform? Do we say that we want to perform mitzvos only when they are without
complications? Certainly not! However, the yetzer hora convinces us that
lending money is a good deed that I need to perform only when it is convenient
and when I feel like being benevolent, not when it is going to result in a
hassle.

SHLEMIEL, THE BORROWER

Nachman once came to me with the following shaylah:

Shlemiel used to borrow money from Nachman regularly, and
although Shlemiel always repaid the loan, he often did so long after the due
date. Nachman wanted to know what he could do about this situation. He wanted
to perform the tremendous mitzvah of lending money, but he wanted his money
back in a reasonable time.

I suggested to Nachman that he tell Shlemiel that the loan
was available, but only if Shlemiel produced a mashkon and agreed to the
above conditions. Since my suggestion, Nachman has been zocheh to
fulfill the mitzvah of lending money to Shlemiel many times, and not once has a
repayment been late! Think of how many brochos Nachman has received from
Hashem because he is willing to subject himself to the “hassle” of transporting
the mashkon to a secure place and being willing to sell it should the
need arise!

Why do people view loaning money as an optional “good deed”
rather than as a commandment? The Chofetz Chayim (Ahavas Chesed
2:8) raises this question and mentions several excuses people make to avoid
lending money. After listing these reasons, the Chofetz Chayim proceeds to
refute each one of them. Simply put, the answer to this question is the old
Yiddish expression, “Ven es kumt tzu gelt, iz an andere velt – When
people deal with their money, they tend to act totally differently.”
Truthfully, people find it difficult to part with their money, even
temporarily. This is precisely why one receives such immense reward for
lending. As Chazal teach us, “lefum tzaara agra – the reward is
commensurate to the difficulties involved.”

Some Aspects of the Halachos of Ribbis

Question #1: Small Thanks

“May I give a small present of thanks to someone who
helped me out with a loan?”

Question #2: Doing a chesed

“Can I violate ribbis by doing a chesed?”

Question #3: Lending my Credit Card

“How can you violate ribbis by letting someone
use your credit card?”

There are a total of six different prohibitions that
can be violated when creating and paying a loan in which there is interest.
Someone who loans money for interest is in violation of the Torah’s
prohibition, even before any interest is, indeed, charged or collected (see Bava
Metzia 62a; Shu”t Mahar”a Sasson #162).

According to the Mishnah, not only do the
borrower and the lender violate the prohibition against ribbis, but the
witnesses to the loan, the co-signer on the loan and the scribe who writes up
the loan document are also in violation of the prohibition (Bava Metzia 75b).
Thus, anyone causing the loan to be finalized is in violation of this mitzvah.
This would include someone who notarizes a loan document that includes a ribbis
provision, and might even include a lawyer who draws up a document that
includes provisions for ribbis (Bris Yehudah 1:6).

The halachos of ribbis are quite
complex, and a review of some of the halachos is always in order. From
my experience, even seasoned Torah scholars make mistakes about these halachos
and may even have business activities that violate the prohibition of ribbis.
What makes these matters even more regrettable is that virtually every one
of these situations can be alleviated easily by usage of a heter iska,
which will be explained later in this article.

Chazal were
so concerned that someone would violate the prohibition of ribbis that
they wanted the lender to gain no perceived advantages from the loan, even when
the gains are completely of a non-monetary nature. Thus, the lender may not ask
the borrower to do him a favor that he would not have asked had he not loaned
him money (Tosafos, Bava Metzia 64b s.v. Avol). Similarly, the
borrower may not invite the lender to his simcha, if he would not have
invited him otherwise.  It is even prohibited for the borrower to thank
the lender for the loan (Graz, Hilchos Ribbis #9).

Chazal also prohibited
ribbis that occurs before or after the loan exists. For example, it is
prohibited for the borrower to bring a small gift to the lender, as a token of
thanks for the loan (Mishnah Bava Metzia 75b). This is prohibited, even
after the loan has been paid off, and even many years later.

Ribbis Without
a Loan

The halacha prohibits charging for the use of one’s
money, even when a loan did not actually take place. Thus, a merchant may not
add interest charges to a bill (sent to a Jew), because it is past due. He is
permitted to bill for the actual expenses accrued due to his having had to send
an additional bill, as well as any other collection costs he incurs. However,
the merchant may not add service charges because he was forced to borrow money
off his credit line to cover the shortfall.

The prohibition against charging for delay of payment also
applies to acquisitions. Thus, a store may not charge one price for cash and a
different price for credit or delayed payment.

The borrower may pay a co-signer to guarantee a gemach
loan. In a situation where the borrower defaults and the co-signer has to
pay off the loan, the co-signer may collect what he paid from the borrower (Taz
to Yoreh Deah 170:3).

Neighborly Loans

When neighbors borrow small items such as flour,
sugar, or eggs, a loan has taken place. They may not intentionally return more
than was borrowed, which would be considered ribbis. However, if they
are uncertain exactly how much flour or sugar they borrowed, they are permitted
to return enough to be certain that they have definitely returned as much as
they borrowed (see Bava Metzia 75a). One may return an item that is
similar, but not identical, to what was borrowed, if the buyer and seller are
not concerned about the difference. Thus, one who borrowed a loaf of bread of
one brand need not be concerned whether the loaf of bread that he returns is
the same brand or the identical size (Rema, Yoreh Deah 162:1).
Similarly, one need not be concerned that the price may have fluctuated in the
interim (Shaar HaTziyun 450:4). .

Ribbis Without any Benefit to the Lender

The Torah prohibits ribbis if the borrower pays
more than he borrowed, even when no benefit is gained by the lender.

An actual case will show us how people can be guilty
of this violation without realizing it. Reuvain is involved in many chesed
projects, including raising money for tzedakah. Yankel had an excellent
business opportunity and asked Reuvain to help him finance his new endeavor, of
course in a permitted fashion. Reuvain decided that he would rather utilize
this opportunity for a different mitzvah. He tells Yankel, “Instead of becoming
a partner in your business, I will lend you the money interest free, but I’d
like to make a condition that some of the maaser from the profits goes
to support a yeshiva.”

Reuvain assumes that by making the arrangements this
way, he fulfills the mitzvah of lending someone money, which, indeed, is a big
mitzvah of chesed, and, in addition, he will be causing someone else to
give tzedakah, which is also a tremendous mitzvah. Unfortunately for
both Reuvain and Yaakov, since giving the tzedakah was a condition of
the loan, this arrangement incurs a Biblical prohibition of ribbis.
Although the lender, Reuvain, does not gain from the loan, since a condition of
the loan was that Yankel pay more money than he borrowed, this is considered a
Torah violation of ribbis (Rema, Yoreh Deah 160:14). (In this
instance, there would be no violation of ribbis if he asked Yankel as a
favor to donate to the tzedakah cause. Alternatively, they could arrange
some form of heter iska, as will be explained later.)

Borrowing Credit or Credit Cards

Here is another instance that occurs frequently, in
which people wish to do a tremendous chesed but in reality they are
involved in a serious infraction of ribbis. Mrs. Friedman and Mrs.
Goldstein meet at a closeout sale where top quality mattresses are available at
an unbelievable price. Members of Mrs. Friedman’s family need new mattresses,
and she realizes that by purchasing them at the closeout prices she will be
saving hundreds of dollars.

Unfortunately, Mrs. Friedman does not have the money
to purchase the mattresses, nor does she have any credit cards at her disposal.
As she is bemoaning the fact that she will have to forgo this opportunity to
save so much money, Mrs. Goldstein, always eager to do a chesed, offers
Mrs. Friedman to charge the mattresses on her credit card. A very grateful Mrs.
Friedman gladly takes up the opportunity and purchases the mattresses. Her
intention is to make the credit card payments accrued to Mrs. Goldstein’s card
until she can pay off the balance and interest for the mattresses.

Without either lady realizing it, they have now
created a major halachic problem. The credit card company did not lend
the money to Mrs. Friedman, but to Mrs. Goldstein, whose name is on the card.
For this reason, what has transpired here is that two loans have taken place,
both with interest: one from the credit card company to Mrs. Goldstein, and a
second from Mrs. Goldstein to Mrs. Friedman. If Mrs. Friedman makes payments
directly to the credit card company, she will be repaying Mrs. Goldstein’s loan
to the credit company and her own loan to Mrs. Goldstein simultaneously. Thus,
she is now paying her loan to Mrs.Goldstein with interest and  both
well-meaning ladies will have violated the laws against ribbis (Shulchan
Aruch Yoreh Deah 168:17). The parties involved should immediately consult a
halachic authority who understands the halachos of ribbis
well, since there are several ways that the situation described above can be
rectified. (The different ways to alleviate the problem might depend on the
individual’s circumstances, and are beyond the scope and length of this
article.)

A similar problem often happens in a business
partnership, in which one partner has access to a credit line and borrows money
from the credit line for the benefit of the business. Since the credit line is
in his name and not that of the business, without realizing it, he has borrowed
money from the bank and then loaned it to the business, in which he is only one
partner. Thus, he is now considered to be charging his partners for interest on
a loan he has made to them. Again, this problem can be alleviated with a heter
iska.

What is a heter iska?

A heter iska is a halachically approved
way of restructuring a loan or debt so that it is some form of business deal
that is not a loan. There are numerous ways of making a heter iska, and,
indeed, different situations call for different types of heter iska. It
is important for everyone who is involved in any type of business dealings to
understand the fundamental principle of every heter iska: That a heter
iska restructures the loan so that it is an investment or acquisition,
rather than a loan.

Borrowing from Jewish-owned banks

Many people borrow money from banks, mortgage
companies, credit card companies (including stores), brokerages, and credit
unions, without verifying whether they are owned by a Jewish controlling
interest. Without using a heter iska, it is forbidden to borrow money
with interest from any Jewish-owned business, even if it is incorporated.
Although there are some poskim who permit lending money to
a corporation without a heter iska, as will be explained later in this
article, this author is unaware of any posek who permits borrowing
from a Jewish-owned corporation, without a heter iska.

Corporations

Rav Moshe Feinstein ruled that it is permitted to lend
money to a Jewish-owned corporation, without incurring a problem of ribbis. In
Rav Moshe’s opinion, a loan must have an individual who is responsible to pay
for it. When a corporation borrows, no individual is responsible to pay for the
loan. Therefore, Rav Moshe contends that a loan to a corporation does not incur
the prohibition of ribbis, provided that no individual personally
guarantees the loan (Shu”t Igros Moshe, Yoreh Deah 2:63). It should be
noted that many other poskim do not agree with this lenience of Rav
Moshe, contending that there can be ribbis even when a corporation
borrows money (see extensive discussion in Bris Yehudah pg. 138). One
practical difference is that, according to Rav Moshe, it is permitted to have a
savings account in a Jewish-owned bank without having a heter iska,
whereas, according to the other opinions, it is forbidden. However, according
to all opinions it is forbidden to borrow from a Jewish-owned bank, credit
union or brokerage without a heter iska. Thus, one may not buy stocks on
margin from a Jewish-owned brokerage without a heter iska.

Hashkafah of Ribbis

The mitzvah of Ribbis poses an interesting hashkafah
question. Why does the Torah forbid making a profit from my money? The Torah
encourages earning a livelihood, so what is wrong with earning a profit from
lending out money?

Many answers are offered to this question. Kli
Yakar presents the following approach: When a farmer plows and plants his
field, he knows well that if it does not rain sufficiently or if a blight
attacks his crop, he will have nothing to show for his efforts. Thus, even with
all his hishtadlus, he knows that he must daven for Hashem
to help his efforts. Similarly, a person who opens a business knows well that
even with all his planning, his business may not be successful. Thus, he also
knows that he must daven for Hashem to help his efforts. However,
someone who makes his parnasah from lending out money seems to have his
entire livelihood totally secure. He has no daily reminder forcing him to pray
for his daily livelihood. For this reason, explains the Kli Yakar, Hashem did
not want a person to make his livelihood this way. By banning this method of parnasah,
the Torah forced a person to make parnasah in a way that he must be
reminded daily of his need for Hashem’s help.

Question #1: Overcharged esrog

“My esrog dealer charged me $150 for an esrog. My brother-in-law, who knows the business, told me that he overcharged me, and the esrog is not worth more than $35. Can I get my money back?”

Question #2: Just a little bit

“Am I permitted to charge a little bit above the market price for an item?”

Question #3: Damaged coin

“I noticed that someone tried to scrape off some of the metal on a coin that I have. May I use it?”

Question #4: Expert error

“I purchased a rare coin from a dealer, and he clearly undercharged me. Am I required to tell him about it?”

Answer:

Upon graduation from olam hazeh, the first question asked upon entering the beis din shel maalah, the Heavenly Court, is: “Did you deal honestly with your fellowmen?” (Shabbos 31a). The Aruch Hashulchan (Orach Chayim 156:3) explains that this does not mean, “Did you steal?” or “Were your weights honest?” Someone who violated these laws, whether dealing with Jewish or non-Jewish clientele, qualifies as a rosho gamur. Rather, the Heavenly Court’s inquiries are: “Did you make unjustified claims about the quality of the merchandise that you are selling?” “Did you speak to people softly in your business dealings?” “Did you curse, scream, or act angrily with people?” “Did you realize that all livelihood comes only from Hashem and act within that framework?”

Anytime is ideal to discuss the details of this topic; I chose to do so this week, since the parsha involves an obvious question as to whether Rivkah and Yaakov were permitted to deceive Yitzchok about the brochos.

In parshas Behar, the Torah teaches, Lo sonu ish es amiso (Vayikra 25:17). The word sonu has the same root as the word onaah, the name by which we call this mitzvah. The word onaah is difficult to translate into English, but for the purposes of our article, I will use the word overcharging, although, as we will soon see, onaah also includes situations of underpayment or of misrepresentation. The purpose of this article is to present the basic principles; specific questions should be referred to your own rav or dayan. Just as everyone must have an ongoing relationship with a rav for psak and hadracha, one must also have an ongoing relationship with a dayan who can answer the myriad Choshen Mishpat questions that come up daily.

Three types of onaah

There are three types of overcharging that are included in the prohibition of onaah, all of which involve taking unfair advantage:

(1) Fraud – when the item being sold contains a significant flaw that the seller conceals or otherwise misrepresents.

(2) Overpricing – when one party to the transaction is unaware of the market value of the item.

(3) No recourse – when someone is aware that he is being overcharged, but he has no recourse, because of the circumstances.

I will now explain a bit more about each of these types of onaah.

(1) Fraud

It is prohibited to hide a defect or to misrepresent an item. For example, the Mishnah (Bava Metzia 60a) and the Gemara (ibid. 60b) prohibit selling watered-down products, or painting something to hide a flaw or to make it look newer than it is (Shulchan Aruch, Choshen Mishpat 228:9). One may not add inferior material to a quality product when the purchaser will see only the quality product (Bava Metzia 59b-60a; Shulchan Aruch, Choshen Mishpat 228:10, 11).

Onaah is prohibited not only in sales, but also in other transactions, such as hiring people or contracting work (Shulchan Aruch, Choshen Mishpat 227:35, 36, 16).

Shidduchin

Holding back significant medical, emotional or spiritual issues that could affect a shidduch is also prohibited because of onaah. To quote the words of the Sefer Chassidim (#507): “When arranging matches for your children or other family members, do not hide from the other party medical issues that would have been reason for them to reject the shidduch, lest they afterwards choose to annul the marriage. Similarly, you should tell them about deficiencies in halachic observance significant enough that the other party would have rejected the marriage.”

By the way, there is no halachic requirement to reveal detrimental information to a shadchan, and one is not required to inform the other side before the couple meets. However, it must be told sometime before the shidduch is finalized. This particular topic is more detailed than we can discuss in this article. Indeed, I devoted a different article to this topic, entitled “Can I Keep My Skeletons in the Closet.” There are also other articles on the website that touch on this broad topic, which can be found with the search word shidduch.

Insider trading

Insider trading, meaning buying or selling a commodity or security on the basis of information that is not available to the general public, is now a heavily punished felony in the United States, but was once legal there and is still legal in many countries of the world. Halacha prohibits all forms of insider trading because of onaah, since the insider is taking advantage of the other party.

(2) Overpricing

A second type of onaah is when there is no flaw or other problem with the quality of the item being transacted, but the price paid is greater than the item’s market value. Overcharging of this nature is also prohibited because of onaah.

Over a sixth

When the price, or range of price, of an item can be established, if an item was sold at more than one sixth over the market price, the aggrieved party has a right to return the item for a full refund (Shulchan Aruch, Choshen Mishpat 227:4.) For example, the stores that stock this item sell it for up to $600, and the seller charged the purchaser over $700. In this instance, according to halacha, the purchaser can return the item and get his money back. (There are detailed halachos that govern how much time he has to make this claim.)

One can demand return compensation only when the party did not use the item once he realized that he had been overcharged.

Another case where the item cannot be returned: The aggrieved party realized that he was overcharged, but decided to keep the item anyway. In the interim, the price of the item dropped such that he can now get a much better deal. Since his reason to back out on the deal is not because of the original overcharge, he may not invalidate the original sale (Shulchan Aruch, Choshen Mishpat 227:9).

It is interesting to note that there are authorities who rule that even the aggrieving party can withdraw from the deal when the price was so much off mark. This is because they contend that someone does not agree to a transaction if he knows that the price was so disproportionate to the item’s value (Rema, Choshen Mishpat 227:4.)

One sixth

The halacha is that if the overcharge was by exactly one sixth, the deal holds, but the aggrieved party is entitled to be refunded the overcharge sum (one sixth of what he paid). Thus, if the item was worth $600 and it was sold for $700, the purchaser is entitled to receive $100 back.

Less than a sixth

If the overcharge was less than a sixth, which means that the price was clearly too high but less than a sixth over the market value, the deal is valid, and the aggrieved party is not entitled to any compensation. Thus, if the item was worth $600 and it was sold for $690, the deal remains as is.

Is it permitted?

At this stage, we can address one of our opening questions: “Am I permitted to charge a little bit above the market price for an item?” Granted that the deal will be valid if someone did this, is one permitted to do so lechatchilah?

Indeed, this is an issue that is disputed by the halachic authorities (Tur, Choshen Mishpat 227, quoting Rosh). The Tur explains that min haTorah, overcharging is prohibited if one is aware that this is the case, but Chazal were lenient, because it is difficult for anyone to be this accurate. However, many prominent authorities are of the opinion that it is prohibited to overcharge intentionally, even by a very small amount (Aruch Hashulchan, Choshen Mishpat 227:2).

The Tur concludes that a yarei shamayim, a G-d fearing person, should try to act strictly regarding this law.

The Shulchan Aruch rules that it is uncertain whether it is permitted to overcharge by less than a sixth (Shulchan Aruch, Choshen Mishpat 227:6). Some major authorities conclude that a yarei shamayim should return the difference, even in a case where it amounted to less than a sixth (Sma 227:14).

Furthermore, when the price on a specific item is very exact, because of government regulations or market conditions, even those authorities who are lenient about overcharging a small amount will agree in such a case that it is prohibited to charge any more than the accepted market price (Aruch Hashulchan, Choshen Mishpat 227:3).

Cash fast

Here is a situation in which someone cannot demand return compensation, even though he sold the item at way below its value: A seller needed to raise cash quickly and therefore sold items without checking their proper value. He cannot request his money back by claiming that he was underpaid, because it is clear that, at the time he sold them, he was interested in selling for whatever cash he could get (Shulchan Aruch, Choshen Mishpat 227:9).

All items?

The Mishnah (Bava Metzia 56b) quotes a dispute between tana’im whether the laws of overcharging by more than a sixth apply to items such as sifrei Torah, animals and precious stones. The tanna kamma contends that the laws of onaah apply, including the right to have the item returned, whereas Rabbi Yehudah holds that these laws do not apply to such items. In the case of sifrei Torah, this is because the pricing is difficult to determine, and in the cases of animals and precious stones, because the purchaser may have a special need for this specific animal or stone which makes it worth more to him than the usual market price. For example, this animal has the same strength as an animal the purchaser already owns, making it possible to pair them together in work, or the stone matches well to the specific color and size he is using for a piece of jewelry (Bava Metzia 58b).

Wartime

Although most tana’im disagree, the Gemara (Bava Metzia 58b) adds that Rabbi Yehudah ben Beseira ruled that there is no onaah for selling horses, shields or swords during wartime, because your life might depend on it. I presume that this means that during a war, the value of these items far exceeds their normal market price, and that, therefore, even an inflated price is not considered overcharging. The halacha does not follow the opinion of Rabbi Yehuda ben Beseira. Therefore, should someone be overcharged for the purchase of these materials during wartime, he is not required to pay more than the accepted market price.

Overcharged esrog

At this point, we are in a position to examine our opening question: “My esrog dealer charged me $150 for an esrog. My brother-in-law, who knows the business, told me that he overcharged me, and the esrog is not worth more than $35. Can I get my money back?”

This question is discussed in Shu”t Beis Yitzchak (Orach Chayim 108:4). He explains that the laws of invalidating a transaction because of an overcharge do not apply to an esrog purchased for use on Sukkos, unless the esrog was not kosher. His reason is that an individual has all sorts of reasons why he wants to purchase a specific esrog, and that, therefore, high-end esrogim do not have a definitive price. We could compare this to someone who purchases a painting at auction, and an art expert contends that the purchaser overpaid. The opinion of the expert does not allow the buyer to invalidate his acquisition.

Expert error

At this point, let us return to one of our opening questions: “I purchased a rare coin from a dealer, and he clearly undercharged me. Am I required to tell him about it?”

An expert can also be overcharged or underpaid (Mishnah, Bava Metzia 51a; Shulchan Aruch, Choshen Mishpat 227:14). Therefore, the purchaser is required to point this out to the dealer.

Furthermore, if you know that the price of an item has gone up, but the seller is unaware of this, you are required to let him know (Aruch Hashulchan, Choshen Mishpat 227:1).

Mistaken overcharging

A person who overcharged someone in error is required to bring it to his attention. All the halachos mentioned above of overcharging apply, even if it was unintentional (Pischei Choshen 4:10:ftn #1).

Real estate

The Mishnah (Bava Metzia 56a) states that there is no onaah regarding real estate. This means that the concept of a deal being invalidated when the price is more than a sixth overpriced does not relate to land. Nevertheless, it is prohibited to deceive someone in matters germane to property, such as by withholding information that affects the value of the property or its utility (Sma 227:51, quoting Maharshal; Pischei Teshuvah 227:21, quoting Ramban and Sefer Hachinuch).

Title search

If someone sells a property based on his assumption that proper ownership has been established, which is later legally challenged, the purchaser has a claim to get his money back (Shulchan Aruch, Choshen Mishpat 226:5).

Legal tender

At this point, let us examine another of our opening questions: “I noticed that someone tried to scrape off some of the metal on a coin that I have. May I use it?”

In earlier days, a coin’s value was usually determined by its weight and purity. In today’s world, the value of a coin or other currency is determined predominantly by the market forces germane to that country’s currency, but not by the quality of the individual coin, unless it is damaged to the point that it will no longer be accepted in the marketplace. Therefore, today, it is acceptable to use a damaged coin or bill that the average merchant or the bank will accept (Shulchan Aruch, Choshen Mishpat 226:6). One is even lechatchilah permitted to give someone a damaged coin or bill and hoard the nice-looking ones for himself, since it is not harming the other party in any way (Shulchan Aruch, Choshen Mishpat 227:6 and Sma).

Counterfeit money

However, this is true only when the bill or the coin is damaged, but is still legitimate and legal currency. It is forbidden to use counterfeit money, even if you ended up with it in error. Once you know that the currency you are holding is counterfeit, it is not only forbidden to use it, you are required to destroy it (Shulchan Aruch, Choshen Mishpat 227:18). It would seem to me that it is permitted to turn the counterfeit item over to the authorities for investigation and enforcement.

Calculated profit

According to what we have said until now, a person is obligated to know the market value of a product that he is selling and he will violate onaah if he sells it at a price that is clearly significantly above the market price. This means that one must constantly be aware of the fluctuations in market price of all items he is selling. Is there any way one can avoid having to be constantly aware of the market values of the items he is selling?

Yes, there is. It is permitted, halachically, to do the following: A seller may tell the purchaser, “This is the cost at which I acquired this item, and I add this percentage for my profit margin. Therefore, I arrive at the following price” (Bava Metzia 51b as explained by Rambam, Hilchos Mechirah 13:5; Shulchan Aruch, Choshen Mishpat 227:27).

(3) No recourse

Previously, I mentioned that there is a type of onaah in which a person is aware that he is being overcharged, but that circumstances force him to pay more than he should for the item. There are several examples of this. One is when a business or cartel creates a monopoly and then raises prices because they control the market. Since the halachos germane to this situation are somewhat complicated, I will leave this topic for a different time.

A second situation is when someone has a serious need for a product now – and the seller takes unfair advantage, insisting on a price that is well beyond what the item should fetch. For example, someone needs a medicine and can find it only at a certain place, which decides to increase the price tenfold, simply to gain huge, unfair profit. This is forbidden.

Was the seller wrong?

I once purchased a four volume reprint of an old, very hard-to-read edition of a relatively rare sefer. Subsequently, I discovered that the sefer had been reprinted in a beautiful format, a fact which the bookdealer must surely have known. Had I known that the new edition existed, no doubt that I would have purchased it instead. I will leave my readers with the following question: Was the bookdealer permitted to sell me the old edition without telling me that a new one exists? Does this qualify, halachically, as insider trading or deception, and is it therefore prohibited as onaah?

Conclusion

The Gemara tells us that the great tanna Rabbi Yehoshua, the rebbe of Rabbi Akiva, was asked: “What is the best means to become wealthy?” Rabbi Yehoshua advised that, aside from being very careful in one’s business dealings, the most important factor is to daven to He Who owns all wealth (Niddah 70b). A Jew must realize that Hashem’s Torah and His awareness and supervision of our fate is all-encompassing. Making this realization an integral part of our thinking is the true benchmark of how His kedusha influences our lives.

 

 

CHAPTER 1

A QUICK DAVENING

Yankel is in the year of mourning for his father and meticulously fulfills his filial responsibility to “daven in front of the amud.” Finding himself one day at a Mincha minyan in an unfamiliar neighborhood, he races to the amud before anyone else gets a chance. After davening, a nicely dressed gentleman hands Yankel a business card and asks if he can speak to him for a second.

“Are you new in the neighborhood? I don’t believe we have ever met before. My name is Irving Friedman.”

“Mine is Yankel Schwartz. No, I don’t live here. I was just passing through and needed a Mincha minyan.”

“Oh, I would like to make your acquaintance. Could I trouble you for your phone number?”

Not suspecting anything, Yankel provides Irving Friedman with his home, business, and cell phone numbers. Friedman then asks him for his home address, which arouses Yankel’s suspicion. “Why do you want to know?”

“Well, I guess I should be straightforward with you,” Irving continues. “I want you to be aware that you owe me a huge amount of money. You see, I have the chazakah of davening at the amud during this minyan. By grabbing the mitzvah, you stole from me nineteen brachos of the repetition of Shmoneh Esrei and two Kaddeishim, for each of which you owe me ten gold coins. I have made the exact calculation on the back of my business card. If you doubt that you owe me this money, I suggest you discuss the matter with your own rav. Since you look like an ehrliche yid, I assume that you will attempt to pay me before Yom Kippur. However, if that is too difficult, I am willing to discuss a payment plan. You have my phone number on the card.” With this, Irving Friedman (not his real name) got into his car and drove off.

A bit bewildered at this surprising turn of events, Yankel looked at the business card in his hand. The front of the card had Friedman’s name, business address, and the title and logo of his business. On the back, Yankel found the following hand-written calculation:

Invoice:

19 brachos @ 10 gold dinar coins each =                  190 gold dinar coins.

2 kaddeishim @ 10 gold dinar coins each=                 20 gold dinar coins.

Total                                                                            210 gold dinar coins.

Based on my research, these coins are worth between $24 and $200 each, in contemporary dollars (see Shiurei Torah, pg. 302.) This makes a total outstanding debt of between $5,040 and $42,000.

I am willing to accept the lower sum, and I am willing to discuss a payment schedule.

Yours sincerely, I. Friedman

CHAPTER 2

Yankel was shocked. He presumed that Irving Friedman was pulling his leg. Yet, Friedman’s demeanor about the entire matter had been so business-like that it did not seem Friedman was playing a prank on him. “Five grand for one Mincha. He must be kidding!!” was all Yankel could think.

Yankel now realized that his running to the amud was very presumptuous. Usually, one goes to the amud when asked by a gabbai, unless one has a regular chazakah to daven at the amud during that particular minyan. Yankel realized that his enthusiasm to get the amud had clouded his reasonable judgment.

Back in his own shul and on familiar turf, Yankel davened maariv at the amud uneventfully and then noticed his good buddy, Shmuel. Besides being a good friend, Shmuel was more learned than Yankel and would be able to help him sort out what had happened. Yankel told Shmuel about the day’s events and showed him the business card.

“I know that the Gemara talks about charging someone ten gold coins for snatching a mitzvah, but I never heard of someone trying to collect it,” was Shmuel’s surprised reaction.

“Where do you think Friedman got this dollar figure?”

“He has a note on the card quoting ‘Shiurei Torah, pg. 302.’ This is a sefer on the subject of halachic measurements. I don’t have the sefer, but let’s see if the shul has a copy.”

Sure enough, the shul library had a copy of Shiurei Torah by Rav Avrohom Chayim Na’eh, one of the gedolei poskim in Eretz Yisroel about sixty years ago. Shmuel located the chapter where the sefer discusses the halachic sources for determining the value of “ten gold coins,” and indeed, Friedman’s calculations were based on the conclusions of Shiurei Torah.

“What should I do? $5,040 is a lot of money. Do I really owe him this much money because I davened Mincha without checking if someone else had a right to the amud?” Yankel asked his friend.

“Maybe discuss the issue with the Rav.”

CHAPTER 3

Still very disturbed about the matter, Yankel called Rav Cohen to schedule an appointment. By now, he regretted his rash Mincha davening, and realized that it is far more important not to infringe on someone else’s mitzvah than to daven at the amud.

At the appointed time, Yankel arrived at Rav Cohen’s office and explained the whole story, showing him the calculation on the back of the business card.

Rav Cohen noticed a halachic flaw in Mr. Friedman’s argument, but felt that Yankel would benefit more if he found out this information a bit later. The sage knew that this was not the first time that Yankel’s impetuous nature had gotten him into trouble. This situation might help him realize not to be so rash.

Rav Cohen introduced Yankel to the halachic issues involved. “As we know from the Chumash, someone who shechts a bird has a mitzvah of “kisui hadam,” to cover the blood with dirt. The Gemara (Bava Kamma 91b) tells us a story of a shocheit who shechted a bird and then, before he had a chance to fulfill the mitzvah of covering the blood, someone else covered it, thus snatching the mitzvah. The shocheit brought the offending party to a din Torah where the great Tanna Rabban Gamliel presided. Rabban Gamliel ruled that the ‘mitzvah snatcher’ must pay ten gold coins for taking someone else’s mitzvah.”

“But in that case he is being fined for taking away his mitzvah, not for the bracha,” Yankel countered.

“Actually, the Gemara (Chullin 87a) asks exactly this question. The Gemara cites a case where someone grabbed someone else’s right to lead the bensching. In the time of the Gemara, when a group of people bensched together, one person recited the entire bensching aloud, and the others listened attentively and answered amen when he finished each bracha. By hearing the brachos of the person reciting the bensching, they fulfilled their obligation to bensch.

“In this instance, someone else began bensching other than the person who had the right to bensch. The Gemara discusses whether the person who bensched must compensate for one mitzvah, which is ten gold coins, or for four brachos, which is forty coins.”

Yankel, now keenly aware of the difference between ten coins and forty, lets out a sigh.

“How does the Gemara rule?” asked Yankel, hoping that the Gemara would rule in his favor and save him a lot of money. After all, if the Gemara rules that the entire bensching is only one mitzvah, his nineteen snatched brachos, which are only one mitzvah, are worth only ten gold coins. However, if the Gemara rules that he must compensate per bracha, he must pay 190 gold coins. By some quick arithmetic, Yankel figured that this saves him at least $4,500! He had never before realized before how much a Gemara discussion might be worth.

Rav Cohen realized what was going through Yankel’s head. “Well, there are other issues that impact on your case, but …. the Gemara rules that he must pay forty gold coins.”

The ramifications of this ruling were not lost on Yankel. “But what is he paying for? He didn’t take anything.”

“That is a really good question,” responded the Rav patiently. “Rashi (Chullin 87a) explains that the mitzvah snatcher is paying for the reward that he deprived the other person of when the mitzvah was taken away.”

“I didn’t know you could put a price tag on a mitzvah’s reward,” Yankel blurted out. “The reward for a mitzvah is priceless!”

The Rav could not miss this opportunity. “If that is so, then you are really getting a very good bargain.”

“Why?”

“What is worth more, the mitzvos one observes, or the money being paid as compensation?”

“Put that way, I must admit that it is a bargain. But it is still a very expensive bargain!”

Yankel continued. “Are there any other instances of collecting money for someone taking away a mitzvah?”

“The Gemara discusses a din Torah raised by a person whose tree was overhanging a public area and could cause potential damage. Before he could trim the tree, someone else chopped down the problematic branches. The owner placed a claim in beis din against the chopper for snatching his mitzvah. The beis din sided with the owner that his mitzvah was indeed snatched.”

“Shmuel told me that he never heard of anyone collect money for snatched mitzvos. Is there any discussion after the time of the Gemara about collecting for snatched mitzvos?”

“Tosafos discusses a case when someone was ‘called up’ for an aliyah, and another person went up for the aliyah instead, thus snatching two brachos away from the person who had a right to them.”

“What chutzpah!” blurted out Yankel. Then, realizing the hypocrisy in his reaction, he added. “I shouldn’t be the one to talk. If I had a little less chutzpah, I wouldn’t have gotten into such hot water.”

“Whatever happened to this aliyah snatcher?” queried Yankel.

“How much do you think he should have paid?” replied the Rav, cunningly waiting for the best time to reveal the rest of the story.

“Well, based on the bensching case where he paid forty coins for four brachos, I would imagine the aliyah snatcher should pay twenty coins for two brachos, one before and one after the aliyah.”

“You are catching on really well,” complimented the Rav.

“Well, if I do end up financially poorer for this experience, at least I should end up a bit wealthier in Torah learning,” concluded Yankel. “But what do the poskim rule?”

Rav Cohen decided it was now time to let Yankel in on the secret. “There is a dispute in this question between Rabbeinu Tam and his nephew, Rabbeinu Yitzchok. Rabbeinu Yitzchok rules exactly like you contended – the aliyah snatcher must pay twenty gold coins. However, Rabbeinu Tam ruled that he is not required to pay at all (Tosafos, Bava Kamma 91b s.v. vichiyavo).”

Yankel was on the edge of his chair. Maybe Rabbeinu Tam would be his savior!

“How did Rabbeinu Tam get him off the hook?” was all Yankel wanted to know.

Rav Cohen leaned toward Yankel, asking him, “Which act earns more reward, reciting a bracha or answering amen?”

“I would assume reciting the bracha,” responded Yankel, “But because of the way you asked the question, I must be wrong.”

“Indeed, the Gemara (Berachos 53b) declares that it is greater to recite amen than to recite the bracha. Rabbeinu Tam understands this to mean that the person who answers amen receives more reward than the person who recites the bracha! He therefore concludes that the person who snatched the aliyah need not pay, since the person who should have received the aliyah would receive even more reward for reciting amen to the bracha. Remember, the compensation is for losing reward, and the aliyah snatcher did not take away any reward.”

“One second,” blurted out Yankel, “The guy who covered the blood also didn’t stop the shocheit from reciting amen. Why did he have to pay?”

“That is a really good question that the later poskim ask. There are two very different approaches to explain why Rabbeinu Tam agrees that the blood coverer must pay the shocheit. Some contend that he recited the bracha in a way that the shocheit did not hear the bracha and that is why he must pay. According to this approach, had the shocheit heard the bracha, he would not collect compensation for losing his mitzvah.

Others contend that the shocheit has two different claims, one for the mitzvah and the other for the bracha. Answering amen provides an even greater reward than reciting the bracha, so the shocheit does not collect for missing the bracha. However, the shocheit still lost the reward for performing the mitzvah, and for this loss he deserves compensation (Sma 382:7; Shach and other commentaries ad loc.).”

“Is this why Shmuel said he never heard of someone trying to collect ten gold coins for a snatched mitzvah?”

“No. Actually, the reason for this is a bit complicated,” began the Rav. “Technically, only a beis din whose members received the original semicha that Moshe Rabbeinu conferred to Yehoshua can enforce a financial claim. Since we no longer have this semicha, this would mean that no one could ever collect damages or a bad debt. To avoid this problem, Chazal instituted that one can collect damages or debts through any beis din. However, Chazal instituted this method of collecting only when a person suffered out-of-pocket losses, as he does in the case of a bad debt or an injury. When someone took another person’s mitzvah, however, although this is a real loss, there was no out-of-pocket loss. The result is that a mitzvah snatcher owes money and should pay it, but there is no way to force him to pay the debt (Tosafos, Bava Kamma 91b s.v. vechiyavo). However, since there is definitely a moral obligation to pay, the aggrieved party is permitted to seize property as payment.”

Yankel nodded, showing that he understood. “In conclusion, according to many opinions, I owe Mr. Friedman a considerable amount of money. Does it make any difference that I was unaware that he had the right to the amud and didn’t know that I could become obligated to pay a huge sum of money?”

“It should not make any difference, since you owe him for taking away his reward, which is something that you did whether you realized it or not.”

“Do I also owe him for the two kaddeishim? These are not brachos,” inquired Yankel.

“It would seem that Mr. Friedman considers them to be mitzvos, and from his perspective he is probably right. It is true that whether one snatched someone else’s bracha or his mitzvah, one is required to pay compensation for his lost reward. However, it is not clear from the poskim whether one must pay for depriving someone of a mitzvah that is not min haTorah (Yam Shel Shelomoh, Bava Kamma 8:60).”

“What about the fact that he said amen to my brachos. Does that get me off the hook? Do we paskin like Rabbeinu Tam?” The hope in Yankel’s voice was very obvious.

“Actually, there is a big dispute among poskim. Many rule like Rabbeinu Tam, but this is certainly not a universally held position (see Shulchan Aruch, Choshen Mishpat 382 and commentaries).”

“What does the Rav paskin in this situation?”

I would suggest that one follow the decision of the Taz (end of Choshen Mishpat 382), who says that you should contact Mr. Friedman and apologize, and offer some compensation (Aruch Hashulchan 382:7).”

Yankel phoned Irving Friedman. After a few pleasantries, he apologized for having taken the “amud” from him that fateful afternoon, and discussed the conversation he had with Rav Cohen. He offered him some financial compensation, but far less than $5000, which Friedman accepted, and that was the last time Yankel “chapped” an amud without asking beforehand.

 

In honor of the 15^th of Av, I am presenting:

The Spurned Shadchan

The phone rings. Mrs. Weinberg,* a Lakewood* shadchan who often calls to ask shaylos, is on the line.

“I suggested that a local girl meet a bachur who is currently learning in Eretz Yisroel,” Mrs. Weinberg began. “Both families did their research and agreed that it sounded worth pursuing, but they decided to wait until the summer when the bachur would be visiting his family here.”

“When the summer arrived,” Mrs. Weinberg continued, “I called the families back to arrange for the young people to meet. However, they told me that someone else suggested the shidduch, and that they are following up through the other shadchan. Are they permitted to cut me out of the arrangements? After all, it was my idea first!”

Does Mrs. Weinberg have a claim? If she does, for how much money and against whom?

SHADCHANUS GELT

Before we discuss these issues, we need to establish whether paying a shadchan is indeed a halachic requirement.

I often find that people feel that one is not required to pay a shadchan. However, this is a misconception, since the Rama (Choshen Mishpat 264:7) requires paying a shadchan a fee, usually called by its Yiddish name, shadchanus gelt.  Just as you expect to pay your real estate broker, so, too, you should assume you will pay the shadchan. (We should be aware that, according to the Rama, a shadchan’s claim for services rendered has a stronger foundation than a doctor’s fee for an office visit, see Shulchan Aruch, Yoreh Deah 336:2; but that is a topic for a different article.)

Furthermore, there is nothing wrong with a shadchan requesting payment for services rendered, just as an attorney or accountant has every right to demand payment for services.

BROKERAGE FEES

Although it sometimes sounds strange, shadchanus fees are halachically categorized as brokerage fees. Just as one pays a real estate agent for arranging a transaction, so, too, one pays a shadchan for making the arrangements necessary for the engagement and marriage to transpire. Therefore, we must first explain the halachic sources for brokerage fees.

The Gemara (Bava Metzia 63b) mentions the responsibility to pay a broker’s fee to the person who arranges the sale of property or merchandise (Shulchan Aruch Choshen Mishpat 185:1; Rama 87:39). This is a standard business practice, similar to paying a commission to a stockbroker, real estate agent, or personnel recruiter (sometimes called a “headhunter”).

BUT WHAT IF I DIDN’T ASK HIM?

People easily understand that if you approach a broker or agent, you thereby obligate yourself to pay him for his services. However, some people assume that if you did not solicit the service, you are not obligated to pay. Does this distinction have any basis?

According to halacha, you are required to pay for any unsolicited benefit that you would usually pay for. Providing unsolicited benefit is called yored lesoch sdei chaveiro shelo birshus, entering someone else’s field without authorization, and the provider of the benefit is referred to simply as the yored (Bava Metzia 101a).

HOW MUCH DO YOU OWE THE YORED?

You are required to pay the yored as much as you have benefited. If he performed work for you that would normally require you to hire someone, you must pay him the market rate for hiring someone for this work (Bava Metzia 76a; Sma, Choshen Mishpat 375:1).

WHY MUST ONE PAY THE SHADCHAN?

When a single person or the parent of a single person asks someone if they know of any marriageable prospects, they are asking them to perform a valuable service on their behalf. This service has a market value, just as any other brokerage or recruiting fee has a market value (Rama, Choshen Mishpat 264:7).

WHAT IF YOU DID NOT ASK THE SHADCHAN?

Although there are halachic differences whether you approach the shadchan or the shadchan offers his/her service, in either case you are required to pay the shadchan. The basis for this requirement is as follows:

Even if his service is unsolicited, the shadchan is considered a yored, since you received benefit from him for a service for which you would normally pay (Gra, Choshen Mishpat 87:117). As explained above, you must pay him whatever you would have otherwise paid for that service (Bava Metzia 76a, 101a).

AM I REQUIRED TO PAY SHADCHANUS TO A FAMILY MEMBER OR CLOSE FRIEND?

This shaylah was discussed hundreds of years ago. A professional shadchan contacted Mr. Reuven suggesting a gentleman he thought appropriate for Mr. Reuven’s widowed sister-in-law. Mr. Reuven was involved in researching the shidduch and in arranging the couple’s meeting. When the couple announced their engagement, Mr. Reuven informed the professional shadchan that he was expecting half the shadchanus gelt, claiming that he was the shadchan who convinced the woman to consider this shidduch. The professional shadchan contended that he was the only shadchan, and that Mr. Reuven was an interested party and not a shadchan. Mr. Reuven countered that the professional had never made direct contact with his sister-in-law but relied exclusively on him to encourage the shidduch. The matter was referred to Rav Yair Chayim Bachrach, known as the Chavos Yair (after one of the seforim he authored). The rav ruled that Mr. Reuven was indeed a shadchan, since he influenced his sister-in-law to pursue the shidduch. He was therefore entitled to half the shadchanus fee, even though he was related to one of the principals (Shu’t Chut HaShani #3, quoted in Pischei Teshuvah, Even HaEzer 50:16).

WHO MUST PAY THE SHADCHANUS FEE, THE PARENTS OR THE COUPLE?

Usually, the parents of an engaged party pay the shadchanus gelt. Are they required to pay this fee, or is it really the responsibility of the young couple that the parents assume? As we will see, there are halachic ramifications to this question.

The poskim debate this question, making razor-thin distinctions that have major ramifications. Some contend that the responsibility falls upon the young couple, since they are the ones who benefit, even though the prevalent custom is that the parents pay (Shu’t Avnei Nezer, Choshen Mishpat #36). Others contend that since the parents usually pay, the shadchan expects payment only from them, and, therefore, he has no claim against the young couple (Halichos Yisroel #3, quoting Eirech Shai, Choshen Mishpat Chapter 185).

There is a major dispute between these approaches. The first opinion holds that if the shadchan is unable to collect from the parents, he may collect from the couple. According to the second opinion, his only claim is against the parents, and if he cannot collect from the parents, he cannot claim his fee from the young couple.

WHO WENT TO WHOM?

Since we have learned that one must pay the shadchan whether or not one solicited him initially, does it make any difference whether I asked the shadchan or the shadchan approached me first?

There are several differences in halacha that pertain to whether you solicited the shadchan initially or vice versa, including when you are required to pay the shadchan and whether you violate the mitzvah of bal talin if you fail to pay the shadchan on time.

If you approached or telephoned the shadchan initially, then you have hired him or her to perform a job — in this case, to find an appropriate shidduch. If he/she succeeds in his/her mission, then you are required to pay when the job is completed, and you must pay the shadchan as soon as the couple becomes engaged (Shu’t Halichos Yisroel #1-2). Furthermore, if you do not pay him/her on time and the shadchan demands payment, you will violate a Torah prohibition called bal talin, not paying a worker on time, a mitzvah we will explain shortly.

However, if you did not hire the shadchan, then you do not violate bal talin if you do not pay him/her on time, since the shadchan is not your employee.

Another difference in halacha affected by whether the shadchan was solicited or not is whether you must pay him or her at the time the couple becomes engaged or at the wedding. If the shadchan solicited you, then the time you are required to pay the shadchan depends on minhag –– accepted local custom (Rama, Choshen Mishpat 185:10). If the local custom is that people do not pay the shadchan until the wedding, then the shadchanus gelt is considered a marriage expense to be paid then, not an engagement expense. However, if you solicited the shadchan then you are required to pay the shadchan when his/her job is completed, which is when the couple becomes engaged (Shu’t Halichos Yisroel #4).

BAL TALIN – PAYING WORKERS ON TIME

As explained above, if one hired the shadchan, one must pay him/her on time, because of the mitzvah of bal talin.

WHAT IS ON TIME?

There are two deadlines, sunset and daybreak, and one is obligated to pay one’s worker before the first deadline after the job is completed. Therefore, if the worker finished his job before the end of the day, I must pay him by sunset. If he completed the work at night, I must pay him before daybreak (Bava Metzia 111a). (As mentioned above, one violates this prohibition only if the worker demanded payment and the owner refused to pay and there was no understanding or prearrangement of late payment.) According to this approach, if you went to a shadchan who, Baruch Hashem, arranged a successful shidduch, you should make sure to pay him or her immediately after the couple becomes engaged, before the next deadline arrives (Shu’t Halichos Yisroel #11). Others contend that one need not pay the shadchan until the wedding, unless the custom is otherwise (Rav Elyashiv, introduction to Shu’t Halichos Yisroel).

Still other poskim contend that since the responsibility of paying the shadchan really lies with the marrying couple, there is no violation of bal talin if the shadchan is assuming that the parents are paying his fee, since they are technically not required to pay shadchanus gelt.

HOW MUCH MUST I PAY THE SHADCHAN?

One must pay the shadchan the accepted fee in your community for this service (Pischei Teshuvah, Even HaEzer Chapter 50:16).

DIVIDING THE FEE

What happens if two different shadchanim were involved at different stages of encouraging the shidduch? Are they both entitled to be paid? How does one divide the fee? As we can imagine, this is not a recent shaylah.

An early posek, the Shev Yaakov (Choshen Mishpat #13), discusses the following case: Levi recommended that Reuven’s son meet Shimon’s daughter. After the engagement of the young couple, Gad claimed that he had originally suggested the shidduch to the parties and thus he was entitled to part of the shadchanus.

The Shev Yaakov researched the claims. As it turned out, Gad had, indeed, originally suggested the shidduch to both parties, but Shimon and his family had no interest in pursuing it. Levi, however, was a more persistent shadchan and convinced Shimon to consider Reuven’s son for his daughter.

The Shev Yaakov ruled that Gad was not entitled to any part of the shadchanus fee. He contends that a shadchan is entitled to a fee only when he was involved in the part of the discussion that reached fruition. However, in this case, Gad’s proposal did not accomplish anything, and, therefore, he is not considered a shadchan.

By a similar reasoning, a real estate agent who showed prospective clients a house, but was unable to interest them in it, and then a different agent showed them the same house and succeeded in convincing them to purchase it, the second agent is entitled to the commission, according to halacha. (In these instances, if accepted business practice is different it might affect the halacha, which is a topic for a different time.)

Thus, it seems that Mrs. Weinberg is not entitled to any shadchanus fee in our situation, since she was not part of the actual introduction that took place.

Notwithstanding that the Shev Yaakov ruled that Gad was not entitled to a share of the fee, there are cases in which the shidduch involves several parties and each is entitled to a part of the fee. If Sarah suggested a shidduch, but then felt that Rivkah would be a better go-between, and eventually it was necessary to get Leah involved and she was instrumental in the couple subsequently becoming engaged, all three ladies are considered partial shadchanim, according to many poskim. The accepted practice in this case is to divide the accepted shadchanus fee and to award 1/3 to each of the ladies. Other poskim contend that only the person who suggested the shidduch and the one who finalized it are considered shadchanim and they split the fee – but that a go-between who neither suggested a shidduch nor finalized it is not viewed as a shadchan (Shu’t Avnei Nezer, Choshen Mishpat #36).

SOME INTERESTING SHADCHANUS STORIES

A shadchan unsuccessfully attempted to arrange a shidduch between a daughter of the wealthy Weiss family and the son of the wealthy Schwartz family. Although the two families did meet and enjoyed one another, the shidduch did not materialize, and the Weiss girl subsequently married someone else. Later, other shadchanim suggested a match between a younger Weiss daughter and the Schwartz boy, and the couple became engaged. The original shadchan now claimed that he is entitled to a percentage of the shadchanus gelt, claiming that his involvement in the previous unsuccessful shidduch was instrumental in forging the close relationship between the two families that caused the latter shidduch to happen. Does the original shadchan have a claim?

The parties referred this shaylah to the Avnei Nezer (Choshen Mishpat #36). In a very complicated ruling he contends that the original shadchan might be entitled to a very small percentage of the shadchanus gelt for his role. He suggests a compromise on this basis, but rules that one could not be certain that he is entitled to any part of the fee.

IF A SHADCHAN ASKS FOR A HIGHER THAN TYPICAL FEE, AM I REQUIRED TO PAY IT?

If the shadchan did not provide any unusual shadchanus service, and the fee for a shadchan in your area is fairly standard, then the shadchan is not entitled to the extra fee. However, if there is no standard shadchanus fee in your area, or the shadchan performed a special service, then one must pay the shadchan’s higher fee (see Rama, Choshen Mishpat  335:1 and 264:7; Shach 264:15). Shadchanus is like any other profession, where one may not charge significantly above the going rate. However, when there is no fixed accepted amount, then the shadchan is not overcharging, since there is no market amount. Similarly, if the shadchan extends him/herself more than is expected, he may command a higher fee, since one is paying for the extra service (see Rama 335:1).

According to the Midrash, Moshe Rabbeinu was the shadchan between Klal Yisroel and Hashem at the giving of the Torah. Furthermore, Hashem, Himself, is indeed the ultimate Shadchan of every marriage. Thus, we should respect the wonderful role of the shadchanim in our midst, who are involved in a mitzvah that emulates both Hashem and Moshe.

* All names and places have been changed to protect privacy.

 

In honor of Shabbos Shekalim, I present:

Raiding the Pushka and Related Questions

Question #1: TREMENDOUSLY APPEALING!

Yehudah presents the following dilemma: “I often feel pressured to pledge to the tzedakah appeals in shul; however, I am afraid that I will forget to pay afterwards. Is there a simple way to avoid creating a problem?”

Question #2: BORROWERS ANONYMOUS

Susan asks: “I often borrow small change from the pushkas that I keep on my window sill, but I am meticulous to return what I borrowed. Am I, indeed, permitted to borrow from the pushka?”

Question #3: DIVERTING ACTIVITIES

Tamar calls: I have a pushka in the house from an organization with which I have no contact. Instead, I would like to donate the money to my son’s yeshiva, to demonstrate my hakaras hatov.

Answer:

In order to answer these questions, I first need to explain how a few general concepts affect the laws of tzedakah:

1. NEDER – A VOW

The Torah requires us to fulfill our vows (Bamidbar 30:3), and the consequences for neglecting this obligation are very serious (see Kesubos 72a). To avoid violating this prohibition, it is better to simply fulfill the mitzvah involved without reciting a vow to commit oneself (Nedarim 9a). For this reason, concerned people say “bli neder” whenever stating something that may imply a commitment to perform a good deed. The words bli neder prevent the commitment from becoming a vow, although one is still obligated to fulfill what one has promised to keep (Shu’t Shevet HaLevi 10:156:1; see also Shla’h, Torah SheBe’kesav, Parshas Matos, Derech Chayim). (In this article, I am not going to distinguish between the technical differences that exist between a neder, a vow, and a shavua, an oath; but I will refer always to neder.)

TZEDAKAH PLEDGES

Pledging money to tzedakah is a vow that one must fulfill. To quote the Torah:

Motza sifasecha tishmor ve’asisa ka’asher nadarta LaHashem Elokecha nedava asher dibarta bificha. You must be careful and fulfill that which exits your mouth, according to the vow that one recited to Hashem your G-d – anything that you spoke with your mouth (Devarim 23:24).

The Gemara rules explicitly that tzedakah is included in the requirements of this verse (Rosh HaShanah 6a). Therefore, one is required min haTorah to redeem a pledge that one made to tzedakah. Because of this law, it is strongly advisable to make charitable commitments bli neder so that the pledge does not assume the severity of a vow (Shulchan Aruch Yoreh Deah 203:4 and 257:4).

2. BAL TE’ACHEIR — Do not delay paying

This mitzvah prohibits delaying the redemption of a pledge, such as a commitment to offer a korban in the Beis HaMikdash. Reciting a charitable pledge requires one to fulfill it as soon as possible; failure to do so violates the prohibition of bal te’acheir (Devarim 23:22; Rosh HaShanah 6a). The Gemara notes that the requirements of bal te’acheir for a tzedakah pledge are even more exacting than they are concerning other mitzvos, such as korbanos. One who (at the time of the Beis HaMikdash) pledges a korban may wait until the Festivals (Pesach, Shavuos, and Sukkos) to offer them, since he will then be traveling to Yerushalayim, anyway. (Technically, he is required because of a positive mitzvah to offer the korban the first Yom Tov, but does not violate the lo saaseh until all three Yomim Tovim pass.) However, since a pledge to tzedakah can easily be fulfilled as soon as one locates a poor person, one must disburse the funds quickly.

The mitzvah of bal te’acheir provides another reason why one’s pledges to tzedakah should be made bli neder. If someone pledged tzedakah without specifying bli neder, he/she is obligated to redeem the pledge immediately. However, if one specified that the obligation is bli neder, failing to redeem it immediately does not violate bal te’acheir.

We can now address Yehudah’s concern about responding to tzedakah appeals. His question was that he felt pressured to pledge donations and was concerned that he might forget to pay them. Ideally, he should donate without pledging, or alternatively, he can say that he is pledging with the understanding that he is not making any commitment whatsoever. (Essentially, this is disallowing his pledge.) A less preferable choice is to pledge bli neder, which accomplishes that, should he forget to redeem his pledge, he will not have violated either the prohibition of vows or of bal te’acheir.

THE APPEAL WAS SUCCESSFUL, BUT THE INSTITUTION DIED!

By the way, it appears that although the organizations making appeals in Yehudah’s shul are doing a good job, they could use logistic help in recording and collecting the pledges to their cause. Any reader interested in volunteering to help them out?

BORROWING FROM TZEDAKAH FUNDS

At this point, we will address Susan’s concerns about borrowing from the pushka. Her first question was: May one borrow tzedakah’s funds for one’s personal use? The following passage of Gemara discusses this issue:

Rabbah bar Avahu stated, “Someone who declares: ‘This sela coin shall go to tzedakah,’ may use it for his own purposes, and then later pay tzedakah a different coin” (Arachin 6a, as explained by Rashi).

Rabbah bar Avahu’s is teaching that although pledging a coin to tzedakah creates a charitable vow that one must redeem, one may still borrow that coin and replace it. The reason this is true is that tzedakah does not create sanctity that forbids its use (Rambam, Hilchos Matanos Aniyim 8:5). In essence, declaring “this coin shall go to tzedakah” is equivalent to saying, “I hereby commit myself to donate to tzedakah an amount of money equal to the value of this coin.” The coin remains the donor’s, and he may borrow it and later replace it (see Shulchan Aruch Yoreh Deah 259:1).

The Gemara subsequently teaches that one may borrow the pledged coin only if it was not yet given to the gabbai, the tzedakah treasurer. Once the gabbai receives the money it is tzedakah’s property, and one may not borrow it. Under normal circumstances, a treasurer is not authorized to lend or exchange tzedakah funds (Bava Basra 8a; Rambam, Hilchos Matanos Aniyim 8:4). One exception is when the lending or exchanging benefits the recipient of the funds (Arachin 6b; see Pischei Teshuvah, Yoreh Deah 259:4 for another exception).

LIMITED LIABILITY

By the way, the sanction to borrow pledged money is also a liability, since it sometimes makes the person responsible to replace the money if it is stolen (see Choshen Mishpat 301:6). On the other hand, in a case when one may not use tzedakah money, he is not liable, unless he is negligent, such as forgetting where he put it.

WHO OWNS THE MONEY IN THE PUSHKA?

May Susan borrow from the pushka? According to what we have just learned, this depends on whether the money in the pushka already belongs to the organization or is still Susan’s property. Many authorities debated this question extensively about 150 years ago. The shaylah that spawned this literature is interesting.

HISTORICAL BACKGROUND

For the last few hundred years, many Jewish Diaspora households owned a pushka dedicated to Rabbi Meir Baal HaNes, a fund whose purpose was to succor the indigent Jews living in Eretz Yisrael. In a responsum dated Marcheshvan 18, 5626 (1865), Rav Mordechai Eitinga, then rav of Lvov (currently located in western Ukraine), was asked about someone who had accumulated a large sum of money in his Rabbi Meir Baal HaNes pushka and now felt that the local poor had a much greater need for these funds. Could he divert the money to local needs, instead of sending it to Eretz Yisrael? Rav Eitinga discusses two issues:

(1) May money pledged to one charitable cause be diverted to a different one?

(2) Do the poor of Eretz Yisrael already own the money in the pushka?

If the answer to the first question is “yes,” and to the second question is “no,” then the money may be diverted to the local indigent. Otherwise, it must be sent to Eretz Yisrael, because either the terms of the pledge must be absolutely fulfilled, or one is “stealing” money that already belongs to the poor of Eretz Yisroel (Shu’t Maamar Mordechai #15).

Let us follow his analysis.

DIVERTING OR A DIVERSION

Whether one may divert tzedakah money from one individual or organization to another is, indeed, a dispute among early poskim. Why should one be permitted to divert the funds? Explaining this approach requires that we note a new factor that the Gemara did not discuss. In Rabbah bar Avahu’s case, the donor simply declared, “This coin goes to tzedakah,” without specifying a specific individual or organization. However, what happens if someone holding a wad of hundred dollar bills declares, “I dedicate this money to the Asher Richman Hebrew Academy.” Must he contribute this amount of money to the Richman Academy, or may he afterwards decide to send them to the Pauper Yeshiva? Does halachah require him to honor a pledge to a specific organization or individual, or is he simply required to donate this amount of money to any tzedakah? If indeed the pledge is simply a generic requirement to donate this amount to tzedakah, then it should follow that one may actually contribute the funds to a charity different from what he originally intended.

13^TH CENTURY CHUTZPAH

Early authorities discuss this question. A major posek of 13^th century Germany reports a very unusual din Torah. A pauper claimed that a wealthy individual promised him a specific amount of money and had not paid it, whereas the rich man denied ever pledging any money. The poor man contended that the pledge obligated the donor to pay him and that the case is therefore no different from any plaintiff claiming money from a defendant who denies that he owes any. The halachah, in such instances, is that the defendant is required to swear an oath (shevuas heses) denying the claim. Similarly, the Mordechai (Bava Kamma #172) ruled that the affluent man is required to swear that he never pledged any money to the pauper! He does not report whether this pauper was subsequently offered any positions as a publicity director for any major Torah institution.

The poskim prove from this Mordechai that when one pledges money to an individual tzedakah, the particular tzedakah can demand payment. Otherwise, what claim does the pauper have on the rich man? Even assuming that the rich man pledged him money, this is merely an obligation to give tzedakah, which the affluent man may donate anywhere. If the pauper indeed has a claim, it must follow that a pledge automatically includes a debt to the specific individual. Following this line of reasoning, money pledged to one tzedakah cannot be subsequently rerouted to a different one, however legitimate the need (Shach, Choshen Mishpat 87:51; Machanei Efrayim, Hilchos Tzedakah #7).

LOCAL OR ISRAEL?

Although not all authorities accept this position of the Mordechai (cf. Shu’t Maharit #22 and #39), many later authorities do follow his ruling (Ketzos HaChoshen, 87:21). Based on this analysis, most later authorities contend that money placed in a Rabbi Meir Baal HaNes pushka may not be given instead to the local poor (Shu’t Maharya HaLevi #49; Shu’t Beis Yitzchak, Orach Chayim #21).

This allows us to answer our third question asked above: “I have a pushka in the house from an organization with which I have no contact. I would like to donate the money instead to my son’s yeshiva, to demonstrate my hakaras hatov.” The answer is that although supporting the Torah institutions that educate our children is vital, since this money is already designated for one organization, one may not transfer it to another.

PUSHKA BORROWERS ANONYMOUS

All of this does not answer Susan’s question whether she may borrow money from the pushka. Even if money pledged to one institution cannot be transferred to another, until the money becomes the property of the institution, one may borrow it, as we learned before. Thus, we need to determine whether money in the pushka is already the property of the institution or not.

Now we reach an interesting question: What is the status of money in the pushka? Do I still have some control over it, and may I, therefore, borrow it, subject to the above conditions? Or is it now the property of the tzedakah and I may not?

This halachah depends on the following: Who owns the pushka? If I own the pushka, then placing money in the pushka requires me to donate it to tzedakah, but it is not yet their property and I may borrow it. As I mentioned above, this situation may create liability for the funds, should they be stolen.

On the other hand, if the organization assumes that money placed in the pushka belongs to them, then I may not borrow any of that money. The reason for this is that since the pushka is their vessel, money placed inside is equivalent to being given to the gabbai, the tzedakah treasurer (based on Shulchan Aruch Choshen Mishpat 200:3). Most authorities follow this latter interpretation of the halachah.

HABITUAL BORROWERS

Some people are in the habit of borrowing money from the pushkas on a regular basis. Now, after reading my words, they may realize that this practice is sometimes forbidden. Nevertheless, there is a method whereby a person may put money into any pushka and yet still be able to borrow it afterwards

; he should make a condition in advance that when he puts money into the pushka, he is not donating it to the institution, but simply pledging it to them. This way, the money is not yet the property of the institution, and one may borrow it. Although this solution will not help for the money already in the pushka, it can be used to avoid this problem in the future.

Some contemporary authorities suggest that someone who usually borrows from the pushka might be considered as if he made this condition from the beginning, i.e., that he is not giving the money yet to the tzedakah cause, but only pledging it (Derech Emunah, Matanos Aniyim 7:note 121).

To answer Susan’s question, I would suggest that she make a condition, henceforth, that when she places money in the pushka, she is not donating it at this time. In so doing, she reserves the right to borrow from the pushka, although she also creates a responsibility for herself, should the money be stolen. She may decide that she is better off curbing her habit of borrowing from the pushka and make an appointment to join Borrowers Anonymous.

Making change from the pushka benefits the tzedakah which would rather not distribute, transport or deposit its money as small change, but rather in the form of bills (Tzedakah Umishpat Chapter 8, footnote 25, page 148).

Unfortunately, most people do not realize the complex shaylos that arise from shul appeals and pushkas – hopefully this article helps repair this breach. May we all always be showered with berachos for contributing generously to tzedakah!