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Question
Is it allowed to recycle paper which has the name of Allaah on it or even if it says God.
Answer
Praise be to Allah.There is nothing wrong with recycling these papers, so long as they are
not exposed to any mishandling before the writing is erased from them. And Allaah knows
best.
Source: IslamQA (Sheikh Muhammed Salih Al-Munajjid)