Q: Do I have to pay zakāh on a loan that won’t be repaid to me? If a lender has lost all hope of recovering his loan how should he treat the outstanding amount for the purposes of zakāh?
الجواب حامدًا و مصليًا و منه الصدق و الصواب
A: If a lender has lost all hope of recovering his loan because:
a) despite an acknowledgment of the debt by the borrower he is still unable to recover it from him;
b) the borrower denies existence of the debt and the lender is unable to substantiate his claim;
c) the borrower is legally bankrupt and so the lender no longer has any legal recourse; or
c)the judicial system is unlikely to uphold his claim;
then he is not liable to pay zakāh on the outstanding loan.
And Allah knows best.
Mufti Mohammed Zubair Butt
Chair Al-Qalam Sharia Scholars Panel