Moshe received a call from his cousin Gershon. “I want to take a $25,000 loan and need guarantors,” Gershon said. “Would you be willing to be one?”
Moshe said yes, but two months later, Gershon was laid off from his company. He managed to pay off the loan for a few more months, but after that he couldn’t afford to pay anything, and the bank turned to Moshe to honor his guarantee.
Moshe paid the bank. He hoped Gershon would soon find a new job and reimburse him, but a year later Gershon was still unable to find a new job.
“Can we count what you paid as tzedakah?” Moshe’s wife asked. “Gershon really seems to be poor now.”
“I’m not sure,” replied Moshe. “Since I signed as a guarantor, it’s like I owed the bank. How can what I paid the bank be considered tzedakah?”
“But maybe it is,” his wife said. “Can you find out?”
Moshe called Rabbi Dayan and asked, “Can I consider my guarantee payment as maaser kesafim?”
Rabbi Dayan replied, “The Gemara [Chagigah 7b] teaches that a person cannot pay his obligations with maaser money. That’s why, for example, poskim rule that one cannot use maaser kesafim for matanos l’evyonim on Purim [Mishnah Berurah 694:3]. When a borrower defaults, the guarantor becomes legally liable for the loan. Thus, he cannot use maaser money to pay his obligation to the bank.
“Nonetheless, there are exceptions. If the borrower was worthy of receiving tzedakah when he took the loan, and the guarantor initially had in mind to pay from maaser kesafim if the borrower defaulted, he can do so later since then the initial liability was taken on as tzedakah” [Rema, Yoreh De’ah 257:5; Shach 257:12].
“Once the guarantor pays the defaulted loan, the borrower becomes liable to reimburse him what he paid the creditor [Choshen Mishpat 130:1]. Many poskim say that if a borrower is now worthy of receiving tzedakah, a person can use his maaser kesafim to cover and cancel the debt with limitations [Pischei Choshen, Halvaah 1:5; Tzedakah Umishpat 5:13].
The Noda B’Yehudah stipulates: 1) The debt must be canceled with the knowledge and permission of the poor person. 2) The sum is within the range of what one would consider giving tzedakah to such a person” [Pischei Teshuvah, Yora De’ah 257:5; see Igros Moshe, yoreh De’ah 1:153; Beis Dino Shel Shlomo, Yoreh De’ah #1, q. 18].
“Some rule that a lender cannot recoup a loan from maaser kesafim if the debtor declared bankruptcy since the lender can no longer collect the debt in such a case” [Hilchos Tzedakah, p. 54,102].
“Similarly, if the lender already abandoned hope of recouping the loan,” concluded Rabbi Dayan, “some maintain that yei’ush applies to a loan so that it no longer exists. Hence, maaser kesafim, can’t cover it. Many are lenient, though” [Rema and Taz, Choshen Mishpat 163:3; Pischei Teshuvah 163:17; Minchas Yitzchak 5:34; Hilchos Maaser Kesafim 9:9].