We lent a large amount of money to someone in 2005 with a heter iska.Tha borrower used it to develop a property which is only now being finished. The borrrower has not been able to pay back the money until now, but has now managed to let some units which is now generating an income. If we were to go to Beis Din what would the ruling be with regards to returning our loan if he doesn’t have all the money to pay back?

Answer:

The answer to this question depends largely on the details of the heter iska that was arranged between the parties. There is no doubt that you are entitled to some of the money back (normally, at least half), irrespective of whether the borrower has made a profit or not. This half (at least) is entirely the responsibility of the borrower. Part of the arrangement, however, is that the investor (lender) is a partner in the business of the receiver, and he therefore shares in the losses. The heter iska usually obligates the borrower to bring witnesses as to his loss, or to make an oath, which is intended to make it difficult for him to prove a loss, and to accept (possibly) a compromise arrangement. However, if you actually know about the loss, and the borrower does not want to pay, there might be a problem of gezel and/or ribis (depending on the arrangement).

Therefore, you will certainly get something in Beis Din. However, for the sake of your future cooperation with the borrower, who one hopes will become profitable, and therefore begin to pay you your share of the profits, it is certainly in your best interests to try to reach a worthy arrangement for payment outside of Beis Din, perhaps by means of agreed arbitration of somebody expert in ribis and in the mutual obligations of the parties.

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