What is better in the case of a large unpaid debt: demanding the amount from the debtor through the police, or forgiving him? And is forgiveness considered a covering for the debtor, even if one's heart is not completely pure towards him?

The default is that it is desirable to acquit the one in hardship and to pardon the debt, due to the general Islamic proofs.

If the debtor is in hardship, it is religiously obligatory to grant him respite until he finds ease, and it is forbidden to demand payment from him or to imprison him, as Allah Almighty says: {And if there is one in hardship, then grant him respite until ease.}

Pardoning is better than delaying the debt until the Hereafter, and better than retaliation and exacting one's right. Allah Almighty says: {And to pardon is nearer to piety}, and {Take the forgiveness}, and {and those who pardon people}. And the Prophet, peace and blessings be upon him, said: "Allah does not increase a servant who pardons except in honor."

Pardoning when one is able to collect the right is better than pardoning when one is unable.

Justice and exacting one's right may be better than pardoning if pardoning would lead to the oppressor persisting in his injustice.

It is not permissible to supplicate against the debtor unless he is an oppressive procrastinator, despite his ability to pay. Pardoning an oppressor and supplicating against him do not go together. And whoever supplicates against his oppressor has triumphed and missed the virtue of pardon and patience, as Allah Almighty says: {And whoever is patient and forgives, indeed, that is of the matters [requiring] determination.}