How is zakat to be paid on merchandise purchased with debt, on accumulated merchandise, and on debts owed by customers—some of which are long overdue and difficult to collect—given that the merchant is on the verge of bankruptcy and relies on another source of income to pay off his debts?

A person's debts must be offset against the debts owed to him and the money he possesses. If, after deducting the debts, the remaining amount does not reach the nisab, then no zakat is due. If, however, the remaining amount after debts reaches the nisab or more, then zakat becomes obligatory. Money owed by a defaulting or insolvent debtor is subject to zakat for one year after its recovery. As for money in hand or with solvent individuals, its zakat is due annually, and it can be paid at the end of each lunar year or delayed and paid for the past years after its recovery.