A contractor is paid $20,000.00 to do a job. He never does the job instead he pockets the money. The contractor cannot pay back the money. He has many children and has previously (prior to this exchange) declared bankruptcy.

Now there appears to be an uncollectible debt.

The contractor is a friend.

It is wished that the owner of the debt does not cause the contractor to do the same to someone else, just to give back the money that he already owes. Meanwhile, the owner of the debt needs the money or at least some compensation.

Would, or should, there be an agreement to make installment payments. If the payment cannot be collected, could the contractor substitute several hours of labor in lieu of cash?

How can this problem be resolved without hurting anyone?