Definition - What does Bad Debt mean?
Bad debt is a type of debt that cannot be collected and has to be written off. The most common way for bad debt to be derived is through the filing of bankruptcy where the debtor has the court's backing in not paying all that is owed. Another possibility is that the cost of effectively collecting the debt is more than the debt itself. On these occasions, businesses consider these debts as expenses.
Justipedia explains Bad Debt
All attempts and avenues available to a creditor must have been pursued before a debt can be considered bad including through court action.
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