If someone were to ask: Is it preferable to hand it over to the debtor and give it to him so that he may pay it to the creditor, or should we pay it directly to the creditor?
The answer requires some detail:
If the debtor is trustworthy and eager to settle his debt, then undoubtedly it is preferable to give it to him, so that he may make the payment himself and not be embarrassed or disparaged before people.
But if there is reason to fear that he will squander this money, then we do not give it to him; rather, we go to the creditor who is demanding payment from him and settle his debt.
Issue: If a person incurred a debt for something unlawful, should we give him zakat?
The answer is: if he repents, we give him; otherwise, we do not give him, because this would amount to helping him in what is unlawful. Indeed, if we were to give him, he would borrow again.
Issue: May the debt of a deceased person be settled from zakat?
The answer is: if he has left an estate, then he is financially able by virtue of his estate, and the debt should be paid from it.
The correct view is that the debt of the deceased is not to be settled from zakat. Abu Ubayd related this in al-Amwal, and Ibn Abd al-Barr reported it as a consensus. However, the issue is not one of consensus; there is disagreement concerning it, though in our view it is a weak disagreement. Remarkably, Shaykh al-Islam Ibn Taymiyyah, may Allah have mercy on him, permitted the debts of the deceased to be settled from zakat, and reported it as one view within the school of Imam Ahmad. He cited the saying of Allah the Exalted, “and those in debt” [Quran 9:60], maintaining that it does not require transfer of ownership, but only the discharge of liability. Thus, the deceased has a greater need for his liability to be discharged than the living person. Yet the first view is more preponderant: the debt of the deceased is not to be settled from zakat, for the following reasons:
Firstly, the apparent purpose of giving to a debtor is to remove from him the humiliation of debt;