Is this a nonbusiness bad debt??


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I joined a club nine years ago. When I joined, the club agreed to repay 2/3 of the initiation fee when I left. I did leave after nine years and went on a waiting list to get repaid by the club.

I have not received the amount due, and the club has now gone into bankruptcy. I am listed as a creditor in the bankruptcy filing , thus establishing a creditor/debtor relationship. The bankruptcy filing also says that club's debt to me will be "extinguished", so the debt will become worthless. It soumnds like I have satisfied the criteria for a nonbusiness bad dbt.

Question: When the bankruptcy is discahrged, will I have a nonbusiness bad debt claim?
 
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For a claim to be considered bad debt, it must be considered worthless in the same year you want to claim it. Hence, if you determine that the debt was worthless 5 years ago, you can't simply claim it now because it's in bankruptcy. Obviously, you can what you want but make sure you have records to support the year in which the debt became worthless.
 
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Drmdcpa

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What steps were taken 5 years ago to determine it was worthless? A bankruptcy filing is primae facia evidence of worthlessness. So claiming it in the year of bankruptcy should be fine.
 

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