What is the ruling of Islam regarding giving charity from money that could not be collected from a debtor due to his inability, or from a small portion of the sale price that the buyer withheld without the seller's consent?

It is not permissible to waive debts and count them as part of the obligatory zakat, because zakat is a form of solace, giving, donation, and transfer of ownership of money, and not a gain for the giver. Moreover, it is Allah’s right, so it is not permissible to spend it for one’s own benefit. As for forgiving an insolvent debtor without compensation, this is a religiously encouraged act of overlooking, and it is a charity for which one is rewarded, as stated in Allah's Almighty words: (And if there is one in [financial] hardship, then [let there be] postponement until [a time of] ease. But if you give [from your right as] charity, it is better for you, if you only knew.) And refraining from demanding small sums out of modesty or fear of temptation carries a reward.