THE JERUSALEM INSTITUTE OF JEWISH LAW
Rabbi Emanuel Quint, Dean 

Lesson # 61 - Time Allowed for Repayment of a Loan

Reuven loans money to Shimon. If the time for repayment is stated in the loan agreement, oral or written, that is controlling. If the loan has time to run before it has to be repaid, then the lender may not demand payment from the borrower prior to expiration of that time. This applies if the amount of time for repayment was specified when the loan was made, and even if no kinyan was made binding the parties to the terms. However, if the time for repayment was specified after the loan was made, there is an opinion that the lender will be bound by the time so specified only if a kinyan was made. The kinyan is performed by the lender lifting the borrower’s (or any other third person’s) handkerchief or pen or other object, agreeing to be bound. (See Torah Tidbits 428) The lender cannot demand prepayment whether or not the loan was evidenced by a note of indebtedness, whether or not there was collateral security given to secure the loan, and whether or not the lender or debtor (or neither) is alive when the demand is made. That is, provided that in the latter instance, that the debtor’s heirs are in a position similar to the debtor’s regarding the ability to repay the loan. 

All that is said regarding loans is also true to other forms of extension of credit, such as credit for purchased merchandise. 

What if a loan does not stipulate the time of repayment? How much time does the borrower have to repay the loan?

If the loan does not have a time for repayment, then the community’s custom, if any, will be followed. 

If the terms of repayment were not specified when the loan was made and if there is no community custom to govern repayment, then it is deemed to be a thirty day loan. The lender cannot demand payment or institute a lawsuit in Beth Din to collect the loan before the termination of the thirty day period.

This principle does not negate the fact that the borrower may prove that he repaid the loan before the thirty day period expired. 

If the loan is payable on demand, then the lender may demand repayment even on the day that the loan is made (or the credit extended). What has been said regarding loans and extensions of credit does not apply to borrowed objects. A lender may demand return of the borrowed object at any time. The difference between loans and borrowing of objects is that the money of the loan is intended to be spent by the borrower, and other money is to be used for repayment. In the case of a borrowing of an object, the same object is to be returned to the lender. A minority opinion holds that borrowed objects are also subject to the thirty day period. In all events the lender cannot demand return of the object unless the borrower has used it at least once. 

Assume that the lender alleges that the date for repayment of the loan has arrived and the borrower pleads that there is some time left, for example ten more days. The borrower takes hesseth oath (that shall IYH be explained some time in the future when we discuss oaths) and the borrower will have the additional ten days to repay the loan. This holds true if the loan was neither collateralized nor evidenced by a note of indebtedness. If the loan was collateralized or was evidenced by a note of indebtedness, the lender may take a hesseth oath that the time for repayment has arrived, or that the loan was a demand loan, and judgment will be entered in favor of the lender. 

If the collateral that the lender is holding is depreciating in value or is becoming ruined by the passage of time, Beth Din may grant an order to sell the collateral at any time, even before the due date of repayment of the loan. 

If the lender has not been repaid at the time specified for repayment, or if the loan is a demand loan, and the borrower does not repay, the lender may go to Beth Din and ask for an order authorizing the lender to sell the collateral security he is holding. If the borrower is in the city, he must be notified of the lender’s application to the Beth Din, and he must be informed that if he fails to repay the loan, Beth Din will issue an order permitting the sale of the collateral security that the lender is holding. If the borrower is not in the city, then Beth Din may permit the sale of the collateral security upon such terms as Beth Din deems advisable. In modern times with the availability of telephones, telegraphs, telephoto copier machines, facsimile machines, and newer versions of cellphones coming out almost every day, Beth Din should make appropriate terms for the lender to notify the borrower if the borrower can be reached by any modern method of notification. Some authorities contend that Beth Din should refrain from issuing an order for the sale of the collateral until thirty days after the demand for repayment of the loan. There is also an opinion that the law of the land should be followed regarding the time that should elapse between the default and sale of the collateral, since the parties probably had this law in mind when the loan was made and collateral delivered to the lender. 
That which has been said regarding credit between individuals also applies to collateral given to secure a pledge to charity.

Unless provided for in the agreement between the parties, security may not be sold without an order of the Beth Din. Beth Din should appraise the collateral or should have it appraised by experts as to its market value. It is preferable that the security should then be sold for that amount in the presence of witnesses. The presence of witnesses is suggested so that the borrower cannot late allege that the sale of the collateral fetched a greater price that the appraised value and that the lender kept the overage for himself. If the collateral was worth more than the amount of the loan, then the lender must pay such overage to the borrower. 

Ordinarily the lender may not purchase the collateral at the sale. There are authorities who contend that if the sale is conducted by Beth Din including at least one member who is expert as to the value of the collateral, then the lender may purchase at the sale. Many authorities dissent and hold that the lender may not purchase at the sale in any event, even if the loan agreement so provided. 

Assume that the parties agree that if the loan is not repaid by a certain date, the collateral would be sold and the lender would keep any overage as a retroactive gift. Such an agreement is not enforceable as to the overage, since it is in the nature of a penalty. Such an agreement is known as asmachta, an illusory promise, since the person who makes the promise does not want the terms ever to come into existence.

The subject matter of this lesson is more fully discussed in Volume 2, Chapter 73 of A Restatement of Rabbinic Civil Law by E. Quint and on sale at local Judaica bookstores. 
Comments & questions to quint@inter.net.il

With the Chagim and other responsibilities I have fallen behind in answering your communications. I apologize and hope to get back on track after the chagim. - EQ