The Ruling on Forgoing Debts Owed by the Poor and Counting Them as Zakah - Ibn

Question : May Allah reward you. The questioner says: If I have debts owed by people who are unable to pay them, is it permissible to forgo them and count them as the zakah of my wealth?

Answer : The one who seeks help from Allah. A person has a debt owed by a poor person, a poor person who is eligible for zakah. Let us say the debt is ten thousand, and his zakah is due at the amount of ten thousand. So he says: Instead of giving ten thousand from my wealth, I will forgo this poor person's debt and count it as zakah. Is this permissible?
It is not permissible, my brothers. It is haram (forbidden), and the obligation is not discharged by doing so. This is because when he despaired of getting the money, he made it zakah, and that is not valid. Allah the Exalted says: . And it is well known that a debt, compared to existing money, what is it? It is bad and corrupt. Do you see if a person demands ten thousand riyals from you and you say, "I have transferred it to this poor person whom you are demanding ten thousand from," would he be satisfied or not? Answer me. No, it appears the brother says he would be satisfied. You say he would be satisfied? Hmm?
Are you sure? Well, he would not be satisfied. So how can it be valid for the poor person to accept the forgoing of the debt from the one who is unable to pay? But if he said, "I want to give this person whom I am demanding from some of my zakah money to pay me, or to pay someone else what I owe him," and this is without an agreement to return it to its owner, is it permissible or not? This is permissible, my brothers. Pay attention: A person demands ten thousand riyals from someone, and his zakah is ten thousand riyals, so he gives him five thousand from his zakah because he knows he is poor. This poor man returns the five thousand on the condition that he not give it to him as payment for his debt, but without an agreement. This is permissible.