Question

What are the types of situations that result in troubled debt?

Short answer

The types of situations that led to troubled debt include restructurings and impairments.

Step-by-step solution

Meaning of Debt

The term debt can be defined as an amount owed by one person to the other Debt is also referred to as deferred payment, which separates it from an instant purchase.

Examples include bonds, leases, loans, and notes.

Types of situations that result in troubled debt

There are two non-similar types of circumstances that lead to troubled debt. They are:

• Impairments, and
• Restructurings

Restructurings can then be grouped into settlements and alterations of terms.

As soon as the debtor firm faces money troubles, creditors may identify the problem on a mortgage spread out to that firm. Eventually, the creditor may alter the conditions of the mortgage or settles it on conditions not favorable to the creditor. In abnormal circumstances, the creditor compels the debtor into insolvency to certify the most probablecollection on mortgages.