Assalaamu alaykum. Can received interest be utilized to settle a debt? My father passed away and there are some debts left to settle. We received his Employment Providence Fund (EPF) from the government (labour department); the total amount is approximately LKR 950,000. In that, only LKR 266,000 is the contribution; the balance amount is interest. Can this balance interest amount be utilized to settle all the debts given that interest is something equal to waging war against Allaah? At the same time, debt is also a serious matter. How is one to act concerning this according to the Quran and the Sunnah? And if it cannot be utilized, in what means can we spend this money given that it is in our bank account now? I will be awaiting an early response. May Allaah reward you.

All perfect praise be to Allah, The Lord of the worlds. I testify that there is none worthy of worship except Allah and that Muhammad is His slave and Messenger.

You should hasten to settle the debt of your father from his inheritance, and do not use the interest in doing so; rather, the interest must be spent on the general welfare of the Muslims or given to the poor and needy. According to the most preponderant opinion, the heirs do not benefit from it.

Ibn Rushd (the grandfather) from the Maaliki School, said, “As for the inheritance, it does not make the forbidden money lawful; this is the correct opinion which necessitates consideration.”

Shaykh Ibn Taymiyyah was asked in his Fataawa, "A man dealt in interest and left behind money and a son. The son knows about the condition. Does this money become lawful for the son through inheritance or not?” He replied: “...as for the amount of which the son knows that it is from interest, he must give it out.”

Allah knows best.