Getting Rid Of Riba Money

I heard that its allowed in the Hanifi madhhab to give interest money to the needy, is this correct and if it is, does it include people with debts? And can the person who is given this money to pay his debt do that without informing the lender about the origin of the money (being interest) (if the lender is Shafi'i for example or Hanifi)?

In the Name of Allah, Most Compassionate, Most Merciful,

Walaikum assalam,

1. The basis of the Hanafi position is that wrongly-acquired money must be returned to its owner(s). If it is not possible to return it to its owners, such as bank interest, the fuqaha mention that one must give it away to the poor (or to charities in general, according to some), though with the intention of clearing one’s dues of wrongly-acquired money. This is mentioned by Ibn Abidin in his Hashiya, in the Fatawa al-Hindiyya, and in contemporary references such as Ahsan al-Fatawa.

2. The money itself that is being given away is not “haram money”, because once haram money is mixed with other money, the unlawfulness transfers to one’s dues, and the money itself is considered to be owned by one. However, one now owe the extent of the wrongly-acquired money to its owners, or the poor if these aren’t known.

3. People with debts are considered needy if after their debts are considered they do not own a zakat-able amount of wealth.

4. The lender does not  have to be informed about the origin of the money.

5. It is not lost on anyone that it is in no way permissible to earn haram money with the "good intention" of giving it to the poor: "Allah is pure, and accepts nothing but the pure," said the Prophet (Allah bless him and give him peace). What we are doing here is just getting rid of haram wealth; there is no reward to be excepted, rather, only freeing oneself of sin.

Wassalam,

Faraz Rabbani.

[References available upon request, if needed.]