The Islamic finance industry continues to be characterized by uncertainty over how it will deal with individual as well as corporate insolvency. As a result, interest in this area of law is growing. To this end, Islamic insolvency law is emerging as an independent field of study. Being a legal exploratory study using the library method, this study aims to highlight some of the humane principles that should inform a framework for the industry. The author made an attempt to trace back these humane principles to the primary and secondary sources of Islamic jurisprudence. In addition, the author has attempted to focus on the specific legal differences between Islamic and civil law in terms of insolvency. The outcome of this study emphasizes the need for policy makers to focus on both the substantive, and procedural rules of Islamic Banking and Finance. It further highlights that Islamic financial instruments need to properly be geared towards dealing with default or default-like situations and that community resources need to be channeled towards the development of dispute resolution mechanisms.