Sheikh Muhammad al-Mubârak, professor at al-Imâm University
For a person to be obligated to pay Zakâh, he must retain in his possession for one full year a certain minimum amount of money. This amount is known as the nisâb and is equal to the value of 85 grams of pure gold.
When a person has retained in his possession for one full year a sum of money equaling or exceeding the nisâb, he is liable to pay Zakâh on it.
If this person also has an outstanding debt, then this will affect how much Zakâh the person has to pay. One of the following two situations will apply:
1. The debt equals or exceeds the total amount of the savings or at least reduces the savings to less that the nisâb when it is deducted from the savings. This person must use the money to pay off the debt. He will not have to pay Zakâh on it.
2. The debt, when deducted from the total savings, does not reduce the savings to less than the nisâb. In this situation, the person must pay the debt in full. Then the person needs to pay Zakâh on what remains of his savings after the debt is paid.
A Muslim, after a full year has passed, must calculate his total savings. He must pay off all outstanding debts. Then, if what remains equals or exceeds the nisâb, he must pay Zakâh on that remainder. If after paying the debts, what he has left over is less than the nisâb, he will not have to pay any Zakâh.
And Allah knows best
Source: Islam Today