Bad Debts FAQs What is a bad debt? A bad debt is an amount of money that is owed but cannot be collected by the creditor. It can arise from delinquent payments, fraud or insolvency of the debtor. Who are responsible for writing off bad debts? The responsibility for writing off bad debts lies with the company's accounting department or financial institution who lent out the money. Are there any legal implications to having bad debts? Yes, legal implications may exist depending on the circumstance in which the debt was incurred and/or not paid back. It is important to seek professional advice if you think this applies to your situation as it could have serious legal consequences for both parties involved. What are the best ways to avoid or manage bad debts? The best way to avoid or manage bad debts is by thoroughly vetting a customer’s financial stability, conducting regular credit checks and ensuring that collections are enforced promptly when payments become overdue. It can also be beneficial to have policies in place for debt repayment and/or restructuring of loans owed. Is it possible to write off bad debts on taxes? In some cases, businesses may be able to claim losses associated with bad debts as tax deductions, however this will depend on the circumstances of the debt and local laws governing taxation. It is recommended to seek professional advice before attempting any such claims. About the Author True Tamplin, BSc, CEPF® Facebook Linkedin Instagram Twitter Youtube True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists. True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics. To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.