Answered by Shaykh Faraz Rabbani
Can this be given to those people who are indebted with a haraam loan(as long as the debt was not created for a sinful purpose)?
In the Name of Allah, with blessings and peace on the Messenger of Allah
Walaikum assalam wa rahmatullah,
I pray this finds you in the best of health and spirits.
Allah Most High tells us about those eligible for zakat in Surat al-Tawba:
Purely legally, it is valid to give zakat to any Muslim who is in debt (and their debts are greater than their zakatable wealth). However, in terms of propriety, one should only give zakat to those seeking to clear their debts or fulfill other primary needs.
And Allah alone gives success.