Hold that Loan! – Shmittat Kesafim and Pruzbul

The mitzvah to lend money to a Jew in distress, without interest * The Biblical mitzvah refers to a small, short-term loan enabling one to buy food *The mitzvah of cancelling debts at the end of the Shmitta year *It is a mitzvah for a debtor who can, to return his loan – despite Shmitta * The prohibition of avoiding loans before the Shmitta year *Debts of high-risk loans can be secured through collateral * Why is the Biblical mitzvah of ‘shmittat kesafim’ valid only when the Yoval applies * The enactment of the ‘pruzbul’ by Hillel the Elder came in the wake of increasing numbers of poor people, and the fear that the rich would not be able to lend

The Shmitta year is coming to a close, and the period of ‘shmittat kesafim‘ is about to begin, so now is the time to clarify the mitzvoth and ideals associated with it, and thus, understand the logic behind the enactment of the ‘pruzbul‘.

The Mitzvah to Loan

It is a mitzvah from the Torah to lend someone money without interest in his time of need. This mitzvah is a branch of the mitzvah of tzedakah (charity), however, our Sages said that the mitzvah of loaning money is greater than tzedakah, because accepting charity degrades one’s dignity, whereas in a loan, the borrower’s honor is maintained, thus making it easier to re-establish himself (Shabbat 63a). Another advantage of the mitzvah is that loans are given to the poor and the rich, while tzedakah is given only to the poor (Sukkah 49b).

Which Type of Loans did the Torah Command

The type of loans the Torah spoke about were mainly short-term, small loans, which people needed in order to buy food. As our Sages said: “If one lends money to his friend without specifying a time for repaying, he may not demand repayment for at least thirty days” (Makkot 3b). For indeed, up until modern times when people living in advanced countries learned to produce food, clothing, and other household needs in large quantities and cheaply, poverty abounded and people labored strenuously to obtain food and clothing for their families. And although people worked hard for a living – often, they were left without money – either because they had not finished their work, had not yet been paid, or because they could not find a buyer for their goods – and in order to buy food, they were forced to ask for a loan. Such people weren’t poor and couldn’t work, about whom the Torah commanded us to give tzedakah, rather, they needed a temporary loan that would enable them to survive until they were paid. On occasion, even a person who was considered wealthy, owning a nice house, fancy clothes, and expensive furniture was left without cash to buy food for his family, and the Torah even commanded us to lend him money in his time of need. However, if a rich and a poor person came to ask for a loan, the poor person takes precedence, because his situation is more needy, whereas the rich person, if necessary, could sell some of his possessions cheaply in order to survive (Bava Metzia 71a; S.A., C.M. 97:1).

Loans Today

It is important to note that as a result of the rise in living conditions, many of the loans people take today are large loans mainly for investment purposes. For example, a loan to buy an apartment so as not to pay monthly rent, or to start a business that will generate profits, or to pay for professional studies enabling one to earn a respectable living. Since this is an investment and not a loan, the lender is entitled to receive a percentage of the profits for his investment. Ideally, it would be appropriate for the lender and the borrower to calculate the profits created thanks to the investment and split the profits as agreed between them from the start. However, seeing as such a calculation is very difficult and complex, we rely on the ‘heter iska‘ [a halachically approved way of restructuring a loan or debt so that it becomes an investment instead of a loan] (“Peninei Halakha: Shevi’it” 6:3).

The Mitzvah of Shmittat Kesafim

Let’s return to the mitzvah of loans, which the mitzvah of shmittat kesafim is an offshoot.

The Torah commands that in the end of the Shmitta year, all of Israel cancels debts that their fellow Jews owe them, and not require further payment. One who transgresses this, requiring repayment after Shmitta, annuls a positive mitzvah, and transgresses a negative one (Deuteronomy 15:1-3).

The goal of the mitzvah is to help the poor who were unable to pay their debts, so that once in seven years, they could untangle themselves from the burden of debts they had incurred. The Torah set the expiration date for debts at the end of the seventh year, so they could start over the seven-year cycle free from the yoke of monetary obligations.

Seeing as the goal of the mitzvah is to help the poor, a borrower who is able to repay his debts after the Shmitta year, despite being exempt according to the letter of the law – it is a mitzvah for him to repay the loan to the lender as a gift. If he exploited the cancelling of debts and did not pay, ‘ain ruach Chachamim nocha heh’menu‘ (the Rabbis disapproved), and such a person was considered ‘naval b’reshut ha’Torah‘ (despicable even within the parameters of halakha), and other people are even allowed to pressure him to pay his debt to the lender as a gift (Mishna Shevi’it 10:9; Peninei Halakha: Shevi’it 6:2).

The Warning Not to Avoid Loaning Before Shmitta Year

The Torah exceedingly warned not to avoid loaning money to needy people before the Shmitta year, as it is written: “Be very careful that you not have an irresponsible idea and say to yourself, ‘The seventh year is approaching, and it will be the Shmitta year.’ You may then look unkindly at your impoverished brother, and not give him anything. If he then complains to God about you, you will have a sin. Therefore, make every effort to give him, and do not feel bad about giving it, since God your Lord will then bless you in all your endeavors, no matter what you do” (Deuteronomy 15:9-10).

The Mitzvah to Lend Only to Trustworthy People

However, the mitzvah to loan money specifically refers to a trustworthy person, but when the person asking for loan is known to be unreliable, there is no mitzvah to lend him money at any time (S.A., C.M. 97:4), because the mitzvah of loaning money is intended to help people, and not to cause disputes over repayment of the loan.

By even greater force of logic, there is no mitzvah to lend money to a person who is unreliable before Shmitta, because the mitzvah is to lend, and not to give as a gift. An unreliable person who asks for a loan preceding the Shmitta year is essentially asking for a gift, because not being able to pay on time – when the Shmitta year ends, the loan becomes a gift.

Thus, the mitzvah is to lend to people who are trustworthy, who will most probably repay their debt. Even so, every loan carries a certain amount of risk – the borrower might encounter unexpected difficulties and not be able to repay his debt; this is the risk we are commanded to take in order to fulfill the mitzvah of loaning. And even preceding the Shmitta year, the Torah sternly warns us that we are commanded not avoid granting loans to trustworthy people, even though if they are unable to repay their debts by the end of the Shmitta year, we will have forgo them.

The Solution for High-Risk Loans

When trustworthy people were forced to ask for a large loan, and the risk they would be unable to repay it was substantial, the lender would require a pledge (‘mashkon‘) equivalent to the sum of the loan, or require land be mortgaged (“apotiki“) to guarantee the loan. In this manner, the lender assured repayment of his loan; even at the end of the Shmitta year, such a loan does not expire, since the debt is already considered having been paid by the means of the pledge or the land.

When it was not possible to mortgage land or give a pledge for the repayment of the debt, but nevertheless, the borrower was trustworthy in the eyes of the lender, the lender would give the bill of debt to Beit Din, and n this manner as well, the debt does not expire at the end of Shmitta.

It is a Mitzvah from the Torah only When Yovel Applies

The mitzvah of Shmitta from the Torah applies only when the entire Jewish nation lives in the Land of Israel as required – that is to say, every tribe in its inheritance, and every family on its land. Even if all of the Jewish nation lived in Israel but were mixed among themselves – i.e., some of the tribe of Binyamin resided in the inheritance of Yehudah, or vice versa, they are not considered as residing in the land as required, and the obligation of Shmitta from the Torah is annulled (Archin 32b).

The Logic in the Mitzvah

The logic of this mitzvah is clear. When the Yovel (Jubilee year) applied, every family in Israel owned a plot of land from which they could make a living, and consequently, poor people were few, and the risk of not repaying loans was slight. In this type of a situation, the Torah commanded every Jew who had money to spare, to give small loans for food to trustworthy people who encountered financial difficulties, and cancel the few debts of those who were unable to repay their loans by the end of the Shmitta year.

Similarly, the mitzvah to refrain from working the land in the Shmitta year from the Torah applies only when Yovel is observed, because only when all of Israel has land in the country and they all keep the Sabbatical year, are they able to manage the great challenge of Shmitta. But when only a portion own land, they are unable to bear the burden of Shmitta single-handedly. In addition, when all of Israel does not reside in the land, chances are the vacant areas will be filled with non-Jews who work their fields for seven years, creating competition that is difficult for those who do fulfill Shmitta to withstand.

The Enactment of Our Sages

After the tribe of Reuben, Gad and half of Manasseh were exiled from their land, about a hundred and fifty years before the destruction of the First Temple, the mitzvah of Shmitta from the Torah was annulled (Archin 32b). Nevertheless, our Sages determined to continue fulfilling the mitzvah. Our Sages also determined keeping Shmitta during the period of the Second Temple, in spite of the fact that Israel did not merit residing in the land as required, every tribe in its inheritance. And although under such circumstances fulfilling Shmitta was more difficult, our Sages determined we should make a greater effort and keep Shmitta, in order to safeguard the ideals of the mitzvoth of Shmitta, and thus, merit redemption and future fulfillment of the mitzvah from the Torah in its completeness.

The Enactment of Hillel the Elder

Towards the end of the Second Temple, the number of poor people requiring loans and failed to repay increased, to the point where the extent of the loss was too great for lenders to bear – above and beyond what the Torah and our Sages had intended through their enactment. A situation was created where, had the rich loaned their money to all needy people as the Torah commanded, then, at the end of each Shmitta year when required to cancel all debts, the lenders would have gone bankrupt. This was not the Torah’s intention for the mitzvah of giving loans; for that purpose, the mitzvah of tzedakah, which has a ceiling, is intended. As our Sages said, a person should not give more than a fifth of his assets and wages to tzedakah, so that his financial stability would not be affected (Ketubot 50 a).

Therefore, so the rich could continue lending to the poor without fear of going bankrupt at the end of Shmitta year, Hillel the Elder enacted the ‘pruzbul‘, thereby expropriating unpaid loans from the law of Shmitta, enabling the rich to continue fulfilling the mitzvoth of giving loans from the Torah, and allowing the poor to make use of loans prior to the Shmitta year, as well.

God willing, next week I will clarify the mitzvah of ‘shmittat kesafim’ and the ‘pruzbul‘ in practice.

This article appears in the ‘Besheva’ newspaper, and was translated from Hebrew. Additional articles by Rabbi Melamed can be found at:
http://en.yhb.org.il/

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