Martyrdom does not expiate rights owed to other people; it only expiate rights owed to Allah, may He be exalted

Praise
be to Allah.

Firstly: 

Muslim (1886) narrated from ‘Abdullah ibn ‘Amr (may Allah be pleased with
him) that the Messenger of Allah (blessings and peace of Allah be upon him)
said: “The martyr will be forgiven for everything, except debt.” 

And Muslim (114) narrated that Ibn ‘Abbaas said: ‘Umar ibn al-Khattaab told
me: On the day of Khaybar, a group of the companions of the Prophet
(blessings and peace of Allah be upon him) came and said: So and so has been
martyred, So and so has been martyred, until they came to a man and said, So
and so has been martyred, but the Messenger of Allah (blessings and peace of
Allah be upon him) said: “No. I saw him in the Fire because of a cloak or
abayah that he stole from the war booty.” Then the Messenger of Allah
(blessings and peace of Allah be upon him) said: “O son of al-Khattaab, go
and call out to the people that no one will enter Paradise except the
believers.” So I went out and called to them, saying: “No one will enter
Paradise except the believers.” 

These two saheeh hadiths were narrated by Muslim (may Allah have mercy on
him) in his Saheeh. There is no contradiction between them, praise be
to Allah. The first hadith indicates that the martyr will be forgiven for
all the sins he committed with regard to matters between him and his Lord,
except for debt; that will not be forgiven, because it has to do with the
rights of people, and sins having to do with the rights of people cannot be
expiated by martyrdom. 

An-Nawawi (may Allah have mercy on him) said: 

The fact that the Prophet (blessings and peace of Allah be upon him) said
“except debt” refers to all the rights of other people, and highlights
the fact that jihad, martyrdom and other righteous deeds do not expiate sins
having to do with the rights of other people; rather they expiate sins
having to do with the rights of Allah, may He be exalted. 

End quote from Sharh Muslim (29/13) 

Al-Haafiz Ibn Hajar (may Allah have mercy on him) said: With regard to the
other saheeh hadith, which says that the martyr will be forgiven for
everything except debt, what we learn from it is that martyrdom does not
expiate shortcomings in paying the dues of other people and that falling
short in paying the dues of other people does not rule out attainment of
martyrdom, because martyrdom does not mean anything other than that Allah
will grant a special reward to those who attain that status, and will grant
them extra honour. The hadith clearly states that Allah will pardon the
martyr for everything except shortcomings in paying the dues of other
people. So if we assume that the martyr has some righteous deeds to his
credit, and martyrdom will expiate his bad deeds, except his shortcomings in
paying the dues of other people, then his righteous deeds will benefit him
in balancing out what he owes to others, and his status of martyrdom will
remain unaffected. But if he does not have any righteous deeds to his
credit, then he is subject to the will of Allah. And Allah knows best.

End quote from Fath al-Baari (193/10) 

At-Turbashti said: What is meant by debt here is that by which he is bound
of the rights of other Muslims, because the debtor is not more deserving of
warning and demands than the transgressor, usurper, betrayer or thief.

End quote from Tuhfat al-Ahwadhi (302/5) 

Secondly: 

The booty is one of the rights of other people; in fact it is one of the
greatest rights of people, because it has to do with the public wealth. Al-Hijaawi
said in az-Zaad (p. 97): 

Booty is acquired by seizing it in battle; it belongs to the fighters who
were present in the battle. The khums (one fifth) is to be taken from it,
then the remainder of the booty is to be divided, with each infantryman
getting one share and each horseman getting three shares – one share for him
and two shares for his horse. The army should have a share of the booty
captured by expeditionary forces, and latter should have a share of what the
former captures. End quote. 

The word ghulool refers to stealing from the war booty before it has been
shared out. An-Nawawi (may Allah have mercy on him) said: Ghulool means
betrayal; the original meaning is stealing from the war booty before it has
been divided. End quote. 

Martyrdom does not expiate stealing from the war booty, because martyrdom
does not expiate sins having to do with the rights of other people, as
explained above. 

The questioner regards stealing from the war booty as a sin other than debt,
but in response it may be said that stealing from the war booty is indeed a
sin that has to do with the rights of other people, because what is meant by
debt in the hadith refers to the rights of other people, not only debt in
the usual sense. 

Some of the scholars are of the view that stealing from the war booty means
that the one who stole it cannot be called a martyr, because as a result of
this act he does not deserve to have all his sins forgiven. 

An-Nawawi (may Allah have mercy on him) said:

Stealing from the war booty rules out the giving of the title of martyr to
anyone who stole from the war booty, if he is killed. End quote. 

Al-Qaari (may Allah have mercy on him) said: 

That is subject to further discussion, because there is no indication in the
hadith that he is not a martyr. How can that be the case when he has been
killed fighting for the sake of Allah and serving the Messenger of Allah
(blessings and peace of Allah be upon him), and it is not stipulated that
the martyr should be without sin or debt, according to scholarly consensus?

End quote from Mirqaat al-Mafaateeh (6/2583) 

It
may be said that stealing from the war booty deprives the martyr of
attaining the highest status of martyrdom, at which all one’s sins are
forgiven, even if that does not deprive him of the virtue of martyrdom
altogether. 

For more information and an explanation that the seriousness of debt should
not be underestimated, please see the answer to question no.
144635 

And Allah knows best.