Bad Debt

Bad debt refers to the amount of money a business or individual is unable to recover from a borrower or customer, typically because they have defaulted on payment. It often occurs when a borrower faces financial difficulties and cannot repay loans, credit card balances, or other owed amounts. For businesses, bad debt is considered a loss and is often written off as an expense, impacting profitability. Managing bad debt involves assessing credit risk carefully and taking steps to minimize non-recovery, but sometimes it’s an unavoidable part of lending and credit transactions.