Definition
Unpaid amounts an HOA concludes it likely won't collect, which are written off the books.
Bad debt is money owed to the association — usually delinquent assessments — that it has determined it probably won't collect and writes off. Writing off bad debt keeps accounts receivable realistic rather than overstating assets the HOA won't actually receive.
Persistent bad debt signals a collections problem and, because the community's expenses continue regardless, ultimately shifts costs onto paying owners. Strong collections and early intervention keep bad debt low.