Debt Bomb

AAA

DEFINITION of 'Debt Bomb'

This occurs when a major financial institution, such as a multinational bank, defaults on its obligations that causes disruption not only in the financial system of the institution's home country, but also in the global financial system as a whole.

BREAKING DOWN 'Debt Bomb'

A debt bomb can occur also if consumer spending is based heavily on debt. For example, if a nation incurred huge credit card debt, individual debt holders could default en masse and create trouble for creditors.

RELATED TERMS
  1. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  2. Default

    1. The failure to promptly pay interest or principal when due. ...
  3. Credit Card

    A card issued by a financial company giving the holder an option ...
  4. Consumer Credit

    A debt that someone incurs for the purpose of purchasing a good ...
  5. Default Risk

    The event in which companies or individuals will be unable to ...
  6. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
Related Articles
  1. Investing Basics

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  2. Credit & Loans

    What's On A Consumer Credit Report?

    A look at the various components and considerations that go into one's credit report and credit score.
  3. Investing

    Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!
  4. Credit & Loans

    5 Signs a Reverse Mortgage Is a Good Idea

    If these five criteria describe your situation, a reverse mortgage might be a good idea for you.
  5. Credit & Loans

    How Long Bankruptcy Will Affect You

    How long will the sad chapter of bankruptcy impact the rest of your life?
  6. Credit & Loans

    Guidelines for FHA Reverse Mortgages

    FHA guidelines protect borrowers from major mistakes, prevent lenders from taking advantage of borrowers and encourage lenders to offer reverse mortgages.
  7. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  8. Credit & Loans

    What's a Nonperforming Loan?

    A nonperforming loan is any borrowed sum where the borrower has failed to pay scheduled payments for at least 90 days.
  9. Credit & Loans

    Can Corporate Credit Cards Affect Your Credit?

    Corporate cards have a hidden downside. If the company fails to pay its bills, you could be liable for the amount and end up with a damaged credit rating.
  10. Credit & Loans

    Your Credit Score: More Important Than You Know

    Credit scores affect key aspects of your personal and professional life. Knowing your score and managing your credit input can make a big difference.
RELATED FAQS
  1. Can creditors garnish my IRA?

    Depending on the state where you live, your IRA may be garnished by a number of creditors. Unlike 401(k) plans or other qualified ... Read Full Answer >>
  2. How can I take a loan from my 401(k)?

    The majority of employers offer eligible employees the opportunity to save for retirement in a qualified plan through paycheck ... Read Full Answer >>
  3. What is the difference between a possessory and a non-possessory lien?

  4. Why is more interest paid over the life of a loan when it is capitalized?

    More interest is paid over the life of a loan when that interest is capitalized because the capitalized interest is added ... Read Full Answer >>
  5. What are the differences between Chapter 7 and Chapter 13 bankruptcy?

    In the United States, the most common kinds of personal bankruptcy filings are under Chapter 7 or Chapter 13 proceedings. ... Read Full Answer >>
  6. What is the difference between a lien and an encumbrance?

    A lien represents a monetary claim levied against property to secure payment of an obligation of the property owner, while ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!