Question:

I am owed money by Jews for goods and services provided over the past few months on credit. I expected all of the outstanding invoices to have been paid by Rosh Hashanah, but it’s beginning to look like some will not be paid by then. I did not lend money to any of these people. Will these debts be canceled by Shemittah?

Answer:

If a Jew has an outstanding loan to another Jew, then at the end of the seventh year, the Shemittah year, that debt is canceled. In the times of Hillel the Elder, this cancellation of debts had become self-defeating: In the seventh year, it became next to impossible to secure a loan, because most lenders refrained from lending money, knowing that they wouldn’t get their money back.

In response to this fiscal belt-tightening of the wealthy, Hillel and the supreme court of the time devised a legal procedure, known as the pruzbul, to ensure that the needy would still be able to procure needed funds. In a pruzbul, a person simply turns over all of his outstanding loans to the court (beit din) for collection on his behalf. Since the Shemittah does not cancel loans owed to the court, the debt remains collectable. (Read more about the pruzbul in this article.)

In your situation, you also need a pruzbul, since the money owed is deemed to be a loan.1

You should therefore make a verbal pruzbul when you perform the annulment of vows in synagogue, on the morning before Rosh Hashanah. You just declare, “I hereby transfer to you [the court] all my debts, in order that I may collect them from you at any time that I want.”

(See here for info about the annulment of vows.)

Normally, the pruzbul is done at the beginning of the Shemittah year. Some, do it also on the last day of the year (see the pruzbul article linked above for more on this). However, after the fact, doing it just at the end of the year works, too.2

Let me know if this helps.

Rabbi Lazer Danzinger for Chabad.org