Forgive loan and convert to zakah
Mu' meneen Brothers and Sisters,
As Salaam Aleikum wa Rahmatullahi wa Barakatuh. (May Allah's Peace, Mercy and Blessings be upon all of you)
One of our brothers/sisters has asked this question:
As Salaam Aleikum wa Rahmatullahi wa Barakatuh.
Could you advise if I get money from any one or I had lended before, if he cannot able to refund the amount on time or forever, If i forgive or can I treat it as Zakat.
Looking forward to hear from you at earliest.
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In the name of Allah, We praise Him, seek His help and ask for His forgiveness. Whoever Allah guides none can misguide, and whoever He allows to fall astray, none can guide them aright. We bear witness that there is no one (no idol, no person, no grave, no prophet, no imam, no dai, nobody!) worthy of worship but Allah Alone, and we bear witness that Muhammad(saws) is His slave-servant and the seal of His Messengers.
Fiqh-us-Sunnah Fiqh 3.80a
Setting Debt Free through Zakah
Formulating the issue, an-Nawawi says in al-Majmu': "Suppose a person owes a debt to another person and at the same time he qualifies for zakah. [When zakah is due for the lender to pay,] he tells [the borrower]: 'Consider the debt for [my] zakah.' Would it be valid?" An-Nawawi says there are two opinions on it. According to Ahmad and Abu Hanifah, who held the better opinion, it does not constitute zakah because it cannot be discharged unless actually paid, while Hasan al-Basri and 'Ata maintain that the responsibility to pay zakah will be discharged even though there is no payment of zakah (at that point in time) by its payer.
Likewise, if an individual trustingly assigns some money to a person for safekeeping and at the time of zakah, he asks the assignee to keep the amount in lieu of his zakah, it will be valid.
In light of the above opinions of the scholars in Islam, the better option for the person who is blessed with abundant sustenance from the Lord, is that a loan cannot be converted into zakah until it is actually paid and discharged with the intention of zakah.
Allah Says in the Holy Quran Chapter 57 Surah Hadid verse 18: For those who give in Charity, men and women, and loan to Allah a Beautiful Loan, it shall be increased manifold (to their credit) and they shall have (besides) a liberal reward.
If Allah Subhanah has blessed you with abundant sustenance, and you forgive the loan given to your believing brother because he genuinely cannot pay back your loan, it will be considered a sadaqah, and a goodly loan given to Allah Subhanah; which the Bounteous Lord has promised that He will bestow a manifold reward from Himself to the one who shows mercy and forgiveness towards his indigent brothers.
Whatever written of Truth and benefit is only due to Allahs Assistance and Guidance, and whatever of error is of me. Allah Alone Knows Best and He is the Only Source of Strength.
Your Brother in Islam,