By Imaam Muhammad Saalih Ibnul-'Uthaymeen

"And if there is (a debtor) in hardship, grant him respite until a time of ease.” [Sooratul-Baqaarah, 2:280]

[Q]: How should one pay zakah on the debts which others owe him?

[A]: Debts which others owe a person – whether they be in the form of the price of sold merchandise, rent, wages, loans, financial penalties one is entitled to due to the destruction of one's property or being the victim of a physical assault, or anything else owed unto a person – can be divided into two categories:

1. Debts in assets in which zakah is not required, such as merchandise; e.g. one person owing another 100 pounds or more of wheat:  zakah is not obligatory in this debt, since zakah is not obligatory in agriculture or grains, except upon he who grows them.

2. Debts in assets in which zakah is obligatory, such as gold and silver:  In this situation, the creditor must pay zakah, as he is the owner (of the assets owed unto him) and has the right to collect or remit the debt.