Are Debts Zakatable for Lenders?
Scholars generally classify debt as “good” and “bad,” similar to current fiscal credit categories. • A good debt is acknowledged by the debtor, who expresses a willingness to pay. Lenders must pay Zakât on good debt every Zakât-year (hawl). • A bad debt will likely not be repaid, either because the debtor is insolvent or he denies a debt for which there is no corroborating proof. The lender does not pay Zakât on bad debt, according to the majority of scholars. But should the lender ever receive repayment on a past bad debt, he is to pay the Zakât due on it for one year only (Fiqh az-Zakât, 74-76).
