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In finance, bad debt, occasionally called uncollectible accounts expense, is a monetary amount owed to a creditor that is unlikely to be paid and for which the creditor is not willing to take action to collect for various reasons, often due to the debtor not having the money to pay, for example due to a company going into liquidation or insolvency.
The willingness of governments to allow lenders to place debtor-in-possession financing claims ahead of an insolvent company's existing debt varies; US bankruptcy law expressly allows this [8] while French law had long treated the practice as soutien abusif, requiring employees and state interests be paid first even if the end result was liquidation instead of corporate restructuring.
According to International Monetary Fund's Government Finance Statistics Manual, contingent liabilities shall be classified as: [2] Explicit contingent liabilities Guarantees. One-off guarantees Loan and other debt instrument guarantees (publicly guaranteed debt) Other one-off guarantees; Other explicit contingent liabilities
Good debt is preferable because it builds value, but there are cases where bad debt is the best choice. For instance, using a loan to buy a reliable car to get you to and from work is a good use ...
Bad credit loans come with higher interest rates than other types of personal loans. Rates may be similar to those of credit cards , which averaged 20.66 percent in May. But credit card interest ...
Guaranteed loans are most often backed by the U.S. government, namely the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA), which back FHA loans and VA loans ...
The debt service coverage ratio (DSCR), also known as "debt coverage ratio" (DCR), is a financial metric used to assess an entity's ability to generate enough cash to cover its debt service obligations, such as interest, principal, and lease payments. The DSCR is calculated by dividing the operating income by the total amount of debt service due.
Deferred financing costs or debt issuance costs is an accounting concept meaning costs associated with issuing debt (loans and bonds), such as various fees and commissions paid to investment banks, law firms, auditors, regulators, and so on. Since these payments do not generate future benefits, they are treated as a contra debt account.