Loan Amnesty

And this is the law of the Shemitah; to release the hand of every creditor from what he lent his friend; he shall not exact from his friend or his brother, because the time of the release for the L‑rd has arrived ... Beware, lest there be in your heart an unfaithful thought, saying, "The seventh year, the year of release is approaching," and you will begrudge your needy brother and not give him... You shall surely give him, and your heart shall not be grieved when you give to him; for because of this the L‑rd, your G‑d, will bless you in all your work and in all your endeavors -- Deuteronomy 15:2; 9-10.

Part of the observance of Shemitah includes the forgiving of all loans. Any debts that are unpaid at the conclusion of the last day of the Shemitah year are cancelled. Even if a borrower wishes to repay his debt, the lender may not accept it unless he reminds the borrower that the debt has been cancelled, and the borrower still insists on giving him the money "as a gift." (Indeed, it is considered praiseworthy for a borrower to do this.)

At the same time, the Torah forbids us to refrain from lending money for fear of Shemitah canceling the loan, and commands us to lend happily, despite the possibility that we may not be paid back.

The Pruzbul

Hillel saw that people were avoiding lending money as the Shemitah year nearedIn the first century BCE, Hillel the Elder saw that people were avoiding giving loans as the Shemitah year neared. This posed two problems: 1) The wealthy people were transgressing the Torah prohibition against withholding loans out of fear of Shemitah. 2) The poor people who desperately needed loans had no way to procure them. He came up with a novel solution:

The Torah tells us that only private debts are cancelled by Shemitah: "He shall not exact from his friend or his brother." If, however, one owes the court (i.e., the community) money, Shemitah does not affect the loan. Based on this rule, Hillel instituted the "pruzbul": a mechanism by which debts are transferred to a Beth Din (religious court).1 By making a pruzbul, one makes his private debts public – and therefore redeemable.2

[Though the rabbis are not empowered to devise a method that circumvents a Torah precept, the Talmud3 explains that nowadays the Shemitah loan amnesty is no longer in effect according to biblical law.4 While Shemitah is still observed today by rabbinic injunction, Hillel was empowered to circumvent these laws due to pressing need.]

Pruzbul Procedure

Although loans are not cancelled until the end of the Shemitah year, once the Shemitah year begins a lender may not demand payment of a loan (although he may accept it without demurring if the borrower wishes to repay on his own). For this reason, it is customary to make a pruzbul5 before Rosh Hashanah of the Shemitah year,6 to be able to collect payment throughout the Shemitah year. This year, the last day before Rosh Hashanah will be Wednesday, September 12th, 2007.

It is advisable to make the pruzbul immediately before Rosh Hashanah because a pruzbul only preserves loans made in the past. Once the pruzbul has been made, any additional loans will require an additional pruzbul.

The text of the pruzbul is:

I give over to you [the Beth Din] all debts which I have, so that I may collect them any time I wish.

Because of the uniqueness of the mitzvah, everyone should make the effort to make a pruzbulThe simplest and most convenient way to make a pruzbul is to attend morning prayer service in your local synagogue on the day before Rosh Hashanah. After the services, a hatarat nedarim ceremony is conducted, during which each member of the congregation stands before a bet din consisting of three (or, in certain communities, ten) of his peers, and recites a vow annulment statement. (Click here for more on hatarat nedarim.) Immediately after finishing the hatarat nedarim, everyone recites the aforementioned pruzbul text, thus orally transmitting all debts to this makeshift court.

Because of the uniqueness of the mitzvah of pruzbul, the Lubavitcher Rebbe encouraged everyone to make the effort to make a pruzbul. In fact, he suggested that even someone who has no collectable debts, and thus has no need for a pruzbul, should symbolically lend a small sum of money to someone else in order to be able to observe the rabbinical institution of pruzbul.