May one take a bank loan with a heter iska

Shalom,

A Jew has a large debt in the Enforcement and Collection Authority (80,000 shekels), and they have offered him an agreement that if he pays 25,000 shekels by tomorrow he will be released from the entire debt. Is he allowed to borrow this sum from the bank using a heter iska?

Shalom u’vracha,

If he owns an apartment, he may in this case rely on a heter iska, and by means of a kinyan sudar transfer the apartment to the bank in the amount of the loan he has taken.

The basis of a heter iska is that the lender is regarded as a partner with the borrower in his business dealings and is entitled to the profits, if there are any. All this applies only if there is in fact a business; if there is no business, it does not help. However, in most of our heter iska formulations there is a clause stating that the lender is a partner in all the borrower’s best kosher enterprises (this clause is called “transfer of assets” and is intended to give the lender greater security that his money will be repaid and that there will be profits, since a deposit can incur losses, whereas if he is a partner in all the borrower’s enterprises, the borrower, in order to be released, will have to prove that he has no undertaking that has earned a profit). Because of this clause, some have permitted taking a loan under a heter iska even for other purposes that are not strictly part of a business, since in exchange for the loan the borrower transfers to the lender a share in every other enterprise he has. (An apartment is considered a business, since it yields income from rent and from appreciation in value.) Nevertheless, under normal circumstances one should not rely on this clause, as it constitutes too great an artifice. But in a case such as this, where the borrower would incur very large losses if he does not take the loan, it is permitted to rely on this clause by means of an explicit and focused transfer of the apartment to the bank through a kinyan sudar.