68 year old Alan Barnes from Gateshead (pictured above with a helper) said he would give the £10 to Katie Cutler, after she was billed nearly £7,000 from a PR company which offered its services after she was drawn into the limelight.
Mr Barnes told the Chronicle newspaper: "It's easy for people to say, 'he's got a lot of money, cough up' but you got to look in to all the alternatives.
Donations from around the world were given to Mr Barnes, who is 4ft 6in tall after he broke his collarbone when he was mugged in January 2015.
Claire Barber PR said it has "no choice" but to go to a small claims court in a bid to retrieve the money from Ms Cutler, which it says is owed for four months work.
Mr Barnes added: "It might seem hard, but if I start handing it out, other people might ask for money. It was given to me on the understanding that I use it for myself."
Ms Cutler now faces the prospect of bailiffs arriving on her doorstep.
After being mugged, Mr Barnes announced God had called him to move to the Shetland Islands, however, he later decided against this and is now searching for another home in Gateshead.