Laws of Tzedakah
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Laws of Tzedakah translated by Rabbi Yosef Goldberg
Siman 253 : For Whom is it Proper to Receive Tzedakah.
11) We are obligated to provide relief to a Torah scholar in a fashion compatible with the honor that should be bestowed upon him. If a scholar does not wish to receive Tzedakah, we endeavor to provide him with business by selling him merchandise at a reduced price, and by buying that merchandise from him at an inflated price. If the scholar has business acumen, we lend him money with which he can purchase his business needs.
12) If Tzedakah is given to a person who needs the help of his fellow man, and desperately seeks the means with which to provide for his living, no creditor is allowed to collect his debts from the monies given to the poor man as Tzedakah.
Addendum: The above holds true provided that in the papers that state his financial needs there is no mention of debt. If there is mention that he has creditors, then Tzedakah is given to him with the explicit intent of helping him pay off his debts.
Shulchan Aruch Yore Deah: The Laws of Tzedakah
Translated by Rabbi Yosef Goldberg - Bayswater, NY