All perfect praise be to Allaah, The Lord of the worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and messenger.
There is nothing wrong with paying zakat to this neighbor, as long as he is considered one of its recipients. However, you can not settle his debts on his behalf unless he permits you. The sound choice is to pay him the zakat and then he chooses whether to settle his debts or avail himself with it in another way.
Allaah Knows best.