How can a debt owed to a deceased person be discharged, when the money has already been spent? And should the amount be handed over to one of his children?

The money must be handed over to the man's heirs, even if indirectly, along with repentance to Allah, unless your father had already paid it, in which case it should be given to your father's heirs, unless your father forgave you while he was in a sound state of mind.