The Ruling on Discharging a Debt as Zakah

Question:
He says: Honorable Shaykh, may Allah grant you success. A person lent another a sum of money, and this borrower has accumulated many debts. The lender wants to waive the debt by paying it off from the zakah of his wealth that he pays out annually. Is this permissible? No,

Answer:
it is not permissible to waive a debt using zakah. One must pay his zakah. If he wants to waive the debt as a gift or act of kindness, there is nothing wrong with that. I mean, if the debtor becomes unable to pay and thinks he is not in a position to repay the debt, does he use the zakah to get rid of the debt? It is not permissible for you to do that; this is not permissible. If the debtor is wealthy, he must pay it off. If he is poor, he must be given a respite until he is able to pay. As for the zakah, it must be paid at the time it becomes obligatory, because it is for the poor and the needy. If the debtor is wealthy, he must pay it off, and if he is poor, he must be given a respite until he is able to pay.