What is a Peruzbal?
The Peruzbal is a process instituted by the Sages [for times when Shemitah is only Rabbinical] which allows a loan to stay in effect even after the Shemitah year, and thus allows one to demand the debt to be paid back. [The word Peruzbal means institution [“Peruz”] for the wealthy [“Bul”].] The Peruzbal facilitates the handing over of all the debts of the loaner to a Jewish Court of Law without having to actually give them the loan documents. All the loaner has to do is state before a court prior to Shemitah “I hereby hand over my loans to you in order to [be allowed to] collect the money whenever I desire”. [see “The Peruzbal Process”!] By making this statement the Sages considered it as if the lender has handed over his loan documents to the court.
Does a Peruzbal work even for oral-undocumented-loans: The Peruzbal is affective even regarding an undocumented loan that took place orally. Thus, saying the above statement in front of a court suffices to refrain the loan from becoming nullified.
Handing over one’s loan documents to the court: As explained above, the Peruzbal process instituted by the Sages facilitates the handing over of the loans to the court without having to actually give them the physical documents. This is a leniency towards the Biblical requirement in which only if one hands the physical documents to the court, and asks them to collect his loans, do his loans remain collectable after Shemitah. In the event that one does hand the physical documents to the court then the loan remains binding even in years that Shemitah is Biblically followed.
 Admur Halvah 34
Background of the Peruzbal: If one hands the physical loan documents to the court and asks them to collect his loans then his loans remain collectable after Shemitah even from a Biblical perspective, and hence is valid even when Shemitah is Biblically followed. [Rambam Shemitah 9:15-17; Michaber C.M. 67:11; Smeh 67:22; Admur 34] The Peruzbal process instituted by the Sages is a leniency that facilitates the handing over of the loans to the court without having to actually give them the physical documents. Accordingly, the difference between a Peruzbal and the above method is that by a Peruzbal the Sages were lenient to allow it to work even without the handing over of one’s documents, and thus it also works for undocumented loans, while Biblically, since one must hand over the documents there is no way to avoid nullification of an undocumented loan. [see Smeh ibid]
 Is the Peruzbal effective even during times that Shemitah is Biblical? In the times that Shemitah was a Biblical command, one could only refrain the loans nullification if he hands over the actual loan documents to the court and tells the court that they are appointed to collect the loan. This was even Biblically valid being that the Torah only forbids a lender from demanding the paying back of the loan, however for a court to demand it the Torah never forbade. After the Sages instituted the Peruzbal process the question is raised as to whether the Sages validated this process even towards years of Biblical Shemitah cycles, or if the process was only validated for Rabbinical Shemitah cycles. Some Poskim rule it is valid even during the Biblical Shemitah cycles as Hefker Beis Din Hefker. [Rava Gittin 36b; Raavad 9:16] Others however rule that the Peruzbal is only valid during Rabbinical Shemitah cycles and hence by the Biblical cycles one must hand the actual documents to the court. [Rambam 9:16 as rules Abayey Gittin 36b]
 The reason for the institution: Being that the Sages instituted the Shemitah laws even during times of exile therefore people refrained from loaning each other money due to fear of losing the money after Shemitah, hence transgressing the Biblical prohibition against holding back loans due to fear of Shemitah. When they saw this occurring, they established the Peruzbal process to help the loaners secure collection of their loans even after Shemitah. [Admur ibid; Smeh 67:36]
 Gemara Gittin 36b
 The reason that handing the loans to the court validates its collection after Shemitah: One who hands over his loans to the court before Shemitah and tells them to collect the debts on his behalf is Biblically allowed to collect the loan even after Shemitah as the Shemitah year does not abolish the loan. This is learned from the verse “Do not demand payment from your friend” and when the loan is handed to court, he no longer needs to demand the payment, but rather the court is to do so for him, as they already received the loan before Shemitah. [Admur ibid; Smeh 67:23] This means to say that since the loaner gave the loan to the court, he can no longer demand the debt, but rather the court, and regarding the court there is no prohibition for them to collect debts after Shemitah. Thus, when the Shemitah year comes the verse of “Do not demand” is inapplicable and the loan hence remains active. [see Smeh ibid]
 The verbal Peruzbal versus the document Peruzbal: The original institution of the Peruzbal was in a document form, in which the loaner would write on a document that he is handing all of his debts to the court and the court or witnesses would sign on it. [Gittin 36a; Rambam Shemitah 9:18; Michaber C.M. 37:19] However this only applied for non-Torah scholars. However, Torah scholars were not required to write a Peruzbal document and rather a mere statement sufficed. [Rambam 9:27 based on Gittin 37a; Michaber 67:20] Others however rule that this leniency applies for all people and not just for Torah scholars, and hence anyone can choose to simply recite the Peruzbal words rather than write a Peruzbal document. Practically, so is the final ruling. [Tur 67; Rama 67:20; Admur 35; Likkutei Sichos 7:355; 24:316; See Nitei Gavriel p. 299]
 Admur 34; Rama 67:19; See Background that this was one of the novelties of the Peruzbal over the Biblical method of handing over the documents.
 Smeh 67:22; Rambam Shemitah 9:15-17; See previous footnotes!