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Bad Debt Related Questions

What is bad debt?

Bad debt is an amount of money that is owed for products or services, that is written off by a business as a loss to the business and it is classified as an expense, due to the debt unable to be collected after all reasonable measures have been taken to collect the amount owed. In most cases this usually occurs when the debtor has filed for or declared bankruptcy or the cost of further action in an attempt to collect the debt is above and beyond the debt itself. In most cases the debt is immediately written off by crediting the debtor’s account eliminating any balance that the person owes. Bad debt represents money that is lost by a business which is why it is considered an expense. When an individual has bad debt, they are always wondering who to get this removed. Read below to find Experts answers regard bad debt questions.

In the state of Michigan, can a person collect a debt in Michigan if the person lives in New York?

The company owner can try and file a suit in Michigan and if the defendant does not file an improper venue to change it to New York, then the case can be heard in Michigan. Regardless of where the judgment is, the person would still have to certify it in New York.

Do most leasing companies usually follow through on the judgments even though they know they can't get anything?

In most cases, the leasing company may want at least a small amount of the money owed back. Tax laws are written so that companies can write off the bad debts, so that it might be more of a incentive to them. If they try to collect the whole debt and write it off as a bad debt rather than to get whatever they can get out of the person. Secondary creditors that will buy a debt for pennies on the dollar, would possibly be more willing to work with someone to repay the bad debt that he/she may have, because they buy the bad debt to make money and not lose money, but this all depends on the lending company if they would want to work with a person or not.

How long can a company pursue a bad debt collection even if the bad debt no longer shows up on his/her credit report?

A debt can be bought and sold many times and if there is no judgment has been entered in the case then the statute of limitations may have ran out depending on how long it has been, but if there has been a judgment in the case then there is a limit on how long they can pursue the bad debt. If a judgment has been ordered then the judgment can be good for 10 years and once that 10 years runs out they can extend it for another 10 years.

If a person sells a business and the purchaser does not pay the money, can the seller claim this on his/her taxes as a bad debt to write it off even if he/she is on a cash basis with a SP note?

When the seller sold the company, he/she engaged in a capital transaction which would make the money received from this capital gain. If the seller did not have any capital gain to offset any capital loss then he/she could claim this loss on his/her taxes.

When a company cannot afford to pay their debts it is considered a bad debt. When this happens the company may have questions or concerns as to how long the debt will be enforceable, how long it is useable as a tax write off, or how this works in general. When these questions or concerns come up, then the person may need to consult an Expert.

Ask a Business Lawyer

Law Pro
Law Pro, Attorney
Category: General
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Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
11688690
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Business Lawyers are online & ready to help you now

Law Pro
Attorney
Satisfied Customers: 1767
20 years experience in business law - sole proprietor, partnership, and corporations
Dimitry K., Esq.
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Satisfied Customers: 1495
Run my own successful business/contract law practice.
MShore Law
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Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements

Recent Bad Debt Questions

  • There were a few times in which I was doing personal

    There were a few times in which I was doing personal shopping and realized that I had only my business card on me. I purchased about $220 worth of merchandise, but I noted the purchases on the statements and reimbursed the company. Is this considered 'comingling'
    of funds that jeopardizes me from the protection of the 'corporate veil'? Under what circumstances would something be considered 'comingling' that takes away protection of the corporate veil?
  • For Lucy, my son lives in NV having NV driver license. If

    For Lucy, my son lives in NV having NV driver license. If he goes to CA and borrow his Dad's CA-registered&Insured car & he caused accident in NV, then which laws will apply to this accident case? CA or NV?
    Since the car's owner(his Dad), registration, & insurance are in CA, then does CA laws will apply eventhough the case will be handled in NV court house due to the other party sue in NV court?
  • For Lucy, I've just read the print in Nev. Rev. Stat., Section

    For Lucy, I’ve just read the print in Nev. Rev. Stat., Section 41.470 about minor driving my car that you answered in my previous question. Please help me to understand it better by answer the below questions:
    Q1: I’m liable for a minor under-18 child, who drove my car and caused accident, is this correct? If he is 19 then I’m off the hook, is that right? (see Nev. Rev. Stat., Section 41.470(1))
    Q2: I will be liable to pay up to ONLY 10K if my minor son used my car & caused accident at his fault. Is this correct? (see Nev. Rev. Stat., Section 41.470(2)) I’m a bit confused in this 10K limitation of liability. Please help to clarify this issue.
    Q3: are CA laws the same as NV laws in questions 1&2?
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