BROWSE

Bad Debt Recovery

What is a 'Bad Debt Recovery'

A bad debt recovery is business debt from a loan, credit line or accounts receivable that is recovered either in whole or in part after it has been written off or classified as a bad debt. Because it generally generates a loss when it is written off, a bad debt recovery usually produces income. In accounting, the bad debt recovery credits the allowance for bad debts or bad debt reserve categories and reduces the accounts receivable category in the books.

Explaining 'Bad Debt Recovery'

Not all bad debt recoveries are like-kind recoveries. For example, a collateralized loan that has been written off may be partially recovered through sale of the collateral, or a bank may receive equity in exchange for writing off a loan, which could later result in recovery of the loan and, perhaps, some additional profit.

How to Report Bad Debt Recoveries to the IRS

If a business writes off a bad debt in one tax year and recovers some or all of the debt in a following tax year, the Internal Revenue Service requires the business to include the recovered funds in its gross income. The business only has to report the amount of the recovery equal to the amount it previously deducted. However, if a portion of the deduction did not trigger a reduction in the business's tax bill, the business does not have to report that part of the recovered funds as income.

Recovering Nonbusiness Bad Debts

In some cases, the IRS allows tax filers to write off nonbusiness bad debts. These debts must be completely not collectible, and the taxpayer must be able to prove that he did as much as possible to recover the debt. However, the filer does not have to take the debtor to court. In most cases, showing that the debtor is insolvent or has declared bankruptcy is significant proof. For example, if someone lent his friend or neighbor money in a transaction completely unrelated to either of their businesses, and the borrower failed to repay the loan, that is a nonbusiness bad debt, and the taxpayer may report is as a short-term capital loss.


Further Reading


Good debt or bad debt: Detecting semantic orientations in economic texts
asistdl.onlinelibrary.wiley.com [PDF]
… Good debt or bad debt: Detecting semantic orientations in economic texts … Especially in the case of finance and economic texts, annotated collections are a scarce resource and many … To resolve the missing training data problem, we present a collection of ∼5000 sentences to …

Finance and economic breakdown: modeling Minsky's “financial instability hypothesis”Finance and economic breakdown: modeling Minsky's “financial instability hypothesis”
www.tandfonline.com [PDF]
… Good debt or bad debt: Detecting semantic orientations in economic texts … Especially in the case of finance and economic texts, annotated collections are a scarce resource and many … To resolve the missing training data problem, we present a collection of ∼5000 sentences to …

Credit management and bad debt in Nigeria commercial banks–Implication for developmentCredit management and bad debt in Nigeria commercial banks–Implication for development
repository.fuoye.edu.ng [PDF]
… Good debt or bad debt: Detecting semantic orientations in economic texts … Especially in the case of finance and economic texts, annotated collections are a scarce resource and many … To resolve the missing training data problem, we present a collection of ∼5000 sentences to …

The financial situation of enterprises and its impact on monetary and fiscal policies, Poland 1992–93The financial situation of enterprises and its impact on monetary and fiscal policies, Poland 1992–93
onlinelibrary.wiley.com [PDF]
… Good debt or bad debt: Detecting semantic orientations in economic texts … Especially in the case of finance and economic texts, annotated collections are a scarce resource and many … To resolve the missing training data problem, we present a collection of ∼5000 sentences to …

Causes and consequences of the Spanish economic crisis: Why the recovery is taken so long?Causes and consequences of the Spanish economic crisis: Why the recovery is taken so long?
www.doiserbia.nb.rs [PDF]
… Good debt or bad debt: Detecting semantic orientations in economic texts … Especially in the case of finance and economic texts, annotated collections are a scarce resource and many … To resolve the missing training data problem, we present a collection of ∼5000 sentences to …

Regenerating market attachments: Consumer credit debt collection and the capture of affectRegenerating market attachments: Consumer credit debt collection and the capture of affect
www.tandfonline.com [PDF]
… Good debt or bad debt: Detecting semantic orientations in economic texts … Especially in the case of finance and economic texts, annotated collections are a scarce resource and many … To resolve the missing training data problem, we present a collection of ∼5000 sentences to …

Restructuring of a Bad-Debt Portfolio in a Commercial Bank in the Midst of an Economic Transition Period: A Case Study: Powszechny Bank Gospodarczy w ŁodziRestructuring of a Bad-Debt Portfolio in a Commercial Bank in the Midst of an Economic Transition Period: A Case Study: Powszechny Bank Gospodarczy w Łodzi
www.jstor.org [PDF]
… Good debt or bad debt: Detecting semantic orientations in economic texts … Especially in the case of finance and economic texts, annotated collections are a scarce resource and many … To resolve the missing training data problem, we present a collection of ∼5000 sentences to …

Japan's financial messJapan's financial mess
heinonline.org [PDF]
… Good debt or bad debt: Detecting semantic orientations in economic texts … Especially in the case of finance and economic texts, annotated collections are a scarce resource and many … To resolve the missing training data problem, we present a collection of ∼5000 sentences to …

Bad debts and the cleaning of banks' balance sheets: An application to transition economiesBad debts and the cleaning of banks' balance sheets: An application to transition economies
www.sciencedirect.com [PDF]
… Good debt or bad debt: Detecting semantic orientations in economic texts … Especially in the case of finance and economic texts, annotated collections are a scarce resource and many … To resolve the missing training data problem, we present a collection of ∼5000 sentences to …


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