Is it valid to waive unpaid debt in lieu of zakat payment?

Unpaid debt may not be waived in lieu of paying zakat; if a person owes money and is eligible to receive zakat, it is permissible to pay the person zakat first (so that the money is in his constructive possession) and then ask for the loan to be repaid; it is impermissible to condition the payment of the zakat on the repayment of the loan; it is at the borrower’s discretion whether to repay then or later, though the borrower should be aware that delaying repayment of a loan when the means are available is blameworthy.

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