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n. an uncollectible debt. The problem is to determine when a debt is realistically dead, which means there must be some evidence of uncollectibility or a lengthy passage of time. Discharge in bankruptcy, the running of the statute of limitations to bring a lawsuit, disappearance of the debtor, a pattern of avoiding debts or the destruction of the collateral security can all make a debt "bad." For income tax deduction purposes such a debt in business is deductible against ordinary income (found in Schedule C) and such a personal debt is deductible against short-term capital gains. A debt due for services rendered is not a bad debt for tax purposes, since there is just no income on which to be taxed.
bad debtnoun dishonored bill, inconvertible bill, irreeeemable bill, irretrievable debt, loss, outstanding debt, protested bill, uncollectible debt, write-off
Associated concepts: bad debt loss, bad debt tax deduction
See also: nonpayment