Pesachim 31 - Chametz loan

A Jew borrowed money from a non-Jew, and left some chametz (think whiskey or vodka) in the non-Jew’s house as a collateral. If after Passover the Jew defaults on the loan, the non-Jew remains in the possession of the chametz as a repayment. We therefore can say that the chametz was already in non-Jewish hand on Passover retroactively, and now it is not forbidden for use.

By contrast, if it was a non-Jew who borrowed the money and left his chametz in the Jewish house, then, if after Passover the non-Jew defaults on his loan, the chametz becomes Jewish retroactively, and is therefore forbidden for use, as chametz owned by a Jew on Passover.

In general, Abaye says that when one defaults on a loan, the lender acquires the collateral retroactively, from the first minute of the loan. Why? Because since in the end he did not repay, it is now clear that the collateral belonged to the lender all along. If he did something with it earlier, such as sold it, it now transpires that he had the right to do so.

On the other hand, Rava in a similar situation will say that since the borrower could have paid the money any time, the collateral always remained his, so that if the lender sold it before the loan was due, he did so illegally. It seems though that the rule in the beginning presents a problem to Rava, since there the lender did acquire chametz retroactively!? - Rava will answer that the situation where the chametz was already deposited with the lender is different, because he does not need to take any action to acquire the collateral.

Art: The Irish Whiskey Still by Sir David Wilkie