Reconciling the Books

Q. We've loaned a lot of money to a family which fell on hard times. We hoped the credit would help them get on their feet financially, but now it seems unlikely that they will be able to repay. Can we consider the loan amount a charitable contribution?

A. Many readers probably need some background to this question. It's important to know if the loan "write-off" can be considered a contribution because Jewish tradition encourages us to tithe, that is, to give at least a tenth of our income to charity each year. So there is religious importance to knowing that the contribution can be considered a current donation.

This particular custom is part of a general approach to charity in Jewish tradition. Charity is not viewed as a burden, an unfortunate necessity triggered by the presence of some specific level of poverty or misfortune. Giving charity is a positive mitzvah, a personal religious obligation no less than prayer or Torah study. In some cases, even a person who doesn't know of any needy individuals is obligated to set aside some money for charity until he finds some. (1)

It follows that we don't try to concentrate our giving as much as possible to minimize its intrusion, but on the contrary we try to make giving part of our regular routine. For instance, it is a common custom to give charity every day before our prayers. (2) Indeed, the Rambam explicitly states that for a given amount of charity, it is better to give a small amount many times than to give it all at one time. (3)

By the same token, it is customary to make an accounting each year and make sure that at least ten percent has gone to charity. Charity that was given last year doesn't count for this year's accounting.

Regarding your specific question, Rabbi Moshe Isserles rules that a person may pay off bad loans to the poor from his tithes. The rationale is that in effect we are giving charity to the poor person now, and he is using the money to pay off his debts. This is certainly a praiseworthy use of the money, to repay those who helped him by providing credit in his hour of need. It follows that if the person is no longer poor, yet is still unable to pay back his debts, this procedure can not be used. (4)

Other authorities claim that this procedure can be used only if the loan was original given as an "advance" against future tithes. (5) Alternatively, the money can be written off if the poor person gives permission; then there is a more legitimate basis for considering that the money was given and then returned. Since the basis for allowing the "write-off" is that the money is being given to the recipient now, a person shouldn't write off more than he would reasonably donate to this one recipient. (6) This may be a large amount, since we see that you have been very generous to this family in the past; but probably you would not have given your entire charity budget to them alone, so you shouldn't "give" your entire charity budget now to paying back their loan.

Charity is not meant only to take care of the needs of the poor, but also to remind the better off of their needy brethren and to cultivate a consciousness of caring. Therefore, we should make giving part of our routine. Part of this routine should be making a yearly accounting of our charity obligations. Someone who has given loans to a poor family on a charitable basis may give some of the charity budget to the recipient as a repayment for the loan, but this write-off should be done in a realistic way, where the amount is reasonable and returning the money is a rational use of charity funds.

SOURCES: (1) SA OC 694 (2) SA OC 92:10 (3) Commentary on the Mishnah Avot 3:15 (4) SA YD 257:5 (5) Shach commentary on this chapter (6) Noda BeYehuda II 199.