What is the ruling of settling a debt that has been let go?
Alhamdulillah, praise and gratitude to Allah SWT for His countless blessings for us all. Praise and salutations to our beloved Prophet Muhammad PBUH, his family, companions, and all those who follow his footsteps until the Final day.
Islam doesn’t prohibit us from taking a loan, furthermore, there are clear evidences which discuss the matters related to a loan or taking a debt. This clearly depicts that Islam is a comprehensive religion in all aspects. The commandment of recording a loan or debt is sunnah in Islam. Allah SWT states:
يَا أَيُّهَا الَّذِينَ آمَنُوا إِذَا تَدَايَنتُم بِدَيْنٍ إِلَىٰ أَجَلٍ مُّسَمًّى فَاكْتُبُوهُ ۚ وَلْيَكْتُب بَّيْنَكُمْ كَاتِبٌ بِالْعَدْلِ
“O you who have believed, when you contract a debt for a specified term, write it down. And let a scribe write [it] between you in justice.” 
Ibn Kathir explained, “This verse is a guide from Allah SWT for His believing slaves to write or record if a trade is performed in delayed payment (debt).” 
Likewise, in a hadith narrated by Ka’ab bin Malik RA:
أَنَّهُ تَقَاضَى ابْنَ أَبِى حَدْرَدٍ دَيْنًا كَانَ لَهُ عَلَيْهِ فِى الْمَسْجِدِ، فَارْتَفَعَتْ أَصْوَاتُهُمَا حَتَّى سَمِعَهَا رَسُولُ اللَّهِ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ وَهُوَ فِى بَيْتِهِ، فَخَرَجَ إِلَيْهِمَا حَتَّى كَشَفَ سِجْفَ حُجْرَتِهِ فَنَادَى: يَا كَعْبُ. قَالَ لَبَّيْكَ يَا رَسُولَ اللَّهِ. قَالَ: ضَعْ مِنْ دَيْنِكَ هَذَا. وَأَوْمَأَ إِلَيْهِ أَىِ الشَّطْرَ قَالَ لَقَدْ فَعَلْتُ يَا رَسُولَ اللَّهِ. قَالَ: قُمْ فَاقْضِهِ
“In the mosque l asked Ibn Abi Hadrad to pay the debts which he owed to me and our voices grew louder. Allah’s Messenger (ﷺ) heard that while he was in his house. So he came to us raising the curtain of his room and said, “O Ka`b!” I replied, “Labaik, O Allah’s Messenger (ﷺ)!” He said, “O Ka`b! reduce your debt to one half,” gesturing with his hand. I said, “O Allah’s Messenger (ﷺ)! I have done so.” Then Allah’s Apostle said (to Ibn Abi Hadrad), “Get up and pay the debt to him.” 
The ruling of ibra’ or letting go and abrogate a debt is included in the concept of al-sulh as discussed by syarak. It is permissible. 
Hence, if a creditor has let go of the responsibility of paying back the loan from the debtor, then the debtor is considered free from paying back the loan and it is considered settled. 
However, if the creditor denied the ibra’ or abrogation of the debt, then the creditor must present the evidence regarding the loan. Next, the debtor must take an oath to free himself from the accusation made towards him. This is based on a hadith narrated from Ibn Abbas R.Anhum, where Rasullullah PBUH said:
الْبَيِّنَةَ عَلَى الْمُدَّعِي، وَالْيَمِينَ عَلَى مَنْ أَنْكَرَ
“If people were given whatever they claimed (in disputes), some people would claim the lives and wealth of others; but the oath (of denial) must be taken by the defendant.” 
Imam al-Nawawi in his commentary on the above said: This hadith is a great methodology from the methodologies of syarak rulings. It explained that the speech of a person is unacceptable and remains just a claim. Furthermore, it (the claim) needs evidence or an oath from the defendant. If he (the defendant) is asked to take an oath, then it is permissible for him to do so (take an oath). 
In this issue, in our opinion, the debtor is no longer obligated and is free from the obligation of paying back the debt. The reason is the obligation is automatically abrogated when the creditor willingly let it go without any force. This is in line with the concept of al-sulh that exist in Islamic shariah itself. This follows the Islamic legal maxim:
السَاقِطُ لاَ يَعُوْدُ
“An abrogated matter (settled) can never return.”
However, if he still wants to pay it back after his debt has been cleared, then it is an honourable act. In this matter, we suggest that in the practice of ibra’, both parties must record any decision made as proof regarding the process of considering the debt settled to avoid any future claims.
Let us all supplicate with the following:
اللَّهُمَّ إِنِّي أَعُوذُ بِكَ مِنْ الْهَمِّ وَالْحَزَنِ وَأَعُوذُ بِكَ مِنْ الْعَجْزِ وَالْكَسَلِ وَأَعُوذُ بِكَ مِنْ الْجُبْنِ وَالْبُخْلِ وَأَعُوذُ بِكَ مِنْ غَلَبَةِ الدَّيْنِ وَقَهْرِ الرِّجَالِ
“O Allah, I seek refuge in you from grief and sadness, from weakness and from laziness, from miserliness and from cowardice, from being overcome by debt and overpowered by men (i.e. others).”
 See Tafsir Ibn Kathir, 1/411
 Narrated by al-Bukhari (2563) and Muslim (1558)
 See al-Fiqh Manhaji, 6/147
 See Kitab al-Mu’tamad, 3/458
 Narrated by Al-Baihaqi in al-Sunan al-Kubra (21201). Ibn Hajar in Bulugh al-Maram (421) stated the sanad of this hadith is sahih.
 See Syarah Al-Nawawi ‘ala Sahih Muslim, 4/12