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Chametz as collateral for a loan
Dedicated in memory of Sarah Sherwinter z"l, our beloved mother, grandmother and great-grandmother, by Jules, Carol, Danny, Karli, Davey, Lorna, Kayla, Reuben, and Sarit Sherwinter.

MBY 441:1-2 Chametz as collateral for a loan

As mentioned in the previous lesson, the second scenario discussed in the Gemara and Shulchan Aruch related to joint-ownership/-custody of chametz between Jew and non-Jew is the ‘mashkon’ (collateral given a lender by a borrower). The halacha presents two cases: 1) Chametz collateral which the Jew gives to the non-Jew for a loan extended by the latter to the former. 2) Chametz collateral which the non-Jew gives to the Jew for a loan extended by the latter to the former.

In order to apply the halachic principles to these cases, it is essential to have a basic definition of collateral, and then to modify it according to the particular terms of the collateral agreement referred to in our siman. In general, a borrower may designate certain goods equal to the loan amount - perhaps even depositing them with the lender for security - stating that in the event that he defaults on the loan, the lender can keep the goods. With such an arrangement, the goods never really change ownership until the lender actually collects them in lieu of payment of the debt. As such, the application to Pesach law is straightforward: They remain solely the property of the owner (borrower).

Not so is the ‘mashkon’ dealt with in our siman, which undergoes a more serious transaction, involving 2 steps: 1) The borrower takes the chametz goods to the lender and physically places them in his possession, (or, at the very least, enacts a legally–binding ‘kinyan’ (act of aqusition) to transfer the goods to the lender.) 2) The borrower then tells the lender that if the loan will not be paid back in full by the due date, the goods will retroactively be the property of the lender as of the date of the loan! This is known in the Talmud as the principle of ‘mei-achshav’ (lit. “from now”), i.e. retroactively.

Confused? Let’s act it out: In case #1, suppose the non-Jew lends money to the Jew on 1 Nisan (make up a secular date to match!) The Jew brings the non-Jew a case of expensive scotch on that day and says, “I owe you the money by 1 Iyar. I want you to take possession of the scotch today, so that if I do not repay the loan by the due date, you have already received its equivalent value, and the scotch will be yours retroactively (‘mei-achshav’) as of 1 Nisan! Let’s say now that the Jew does not pay back the loan on time, and the transfer of ownership to the non-Jew becomes effective retroactively as of Nisan 1. Was the Jew in violation of BYBY (‘bal yeiraeh u’bal yimatze’ – owning chametz during Pesach), because at the time, he did not know whether or not he would pay back the loan and reclaim his chametz? That’s the ‘chidush’ (novel idea) of our siman: The Jew is off the hook – he is not in violation of BYBY, and moreover, the scotch is not considered to be ‘chametz she-avar alav ha-Pesach’ (chametz that went through Pesach in the possession of a Jew)! (Ed. The non-Jew can even invite the Jew over for a drink of that scotch after Pesach!)

Hey, wait a minute! How can the Jew enter into this agreement, not knowing whether or not he will repay the loan? If he does pay, then he was, in fact, in violation of BYBY, and the scotch is ‘chametz she-avar alav ha-Pesach’?! CORRECT! It is not permissible for a Jew to do this, because he is putting himself into a state of ‘safek-issur’ (possible violation). The purpose of the halacha is primarily to establish the law for ‘bedi-avad’ (after-the-fact)! However, the following is permissible: The Jew may tell the non-Jew up front: “I’ll tell you right now that I don’t intend to pay back the loan; you’re definitely going to end up with the scotch!” (Ed. If the scotch is rare, the non-Jew might even thank him!)

Question: What if the roles are reversed: The Jew lends money to the non-Jew, and the non-Jew brings the scotch to the Jew with the ‘mei-achshav’ stipulation? Answer: The Jew may certainly not enter into this situation either, as he would be risking the retroactive violation of BYBY and the ensuing prohibition of the scotch as ‘chametz she-avar alav ha-Pesach’. A kosher alternative would be to stipulate that it is not a ‘mei-achshav’ transaction. In this way, the Jewish lender will have no ownership of the ‘mashkon’ whatsoever, until the due date, when the non-Jew will decide whether to repay the loan or transfer ownership of the scotch at that time. In the interim, the Jew will simply be a ‘shomer’ (guardian of a ‘pikadon’ / deposited object) with the understanding that he has no monetary responsibility for it. As such, he is permitted even to store the ‘mashkon’ in his house (with proper safeguards), as we learned in our previous lesson concerning ‘pikdonos’ (MBY 440).

Note: The above halachic guidelines for lender-borrower pertain specifically to a relationship between Jew and non-Jew. When two Jews are involved, the guidelines are different. When a Jew gives another Jew a ‘mashkon’, even without a ‘mei-achshav’ transaction, there is immediately formed a “joint-ownership” between the two, based on a principle called ‘ba’al chov koneh mashkon’ (lit. the creditor shares ownership on collateral). Practically speaking, in the event that Jews entered into a standard chametz ‘mashkon’ agreement (albeit not halachically sanctioned), both parties would be in violation of BYBY, not just the borrower who is the actual owner.

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