Defalcation

AAA

DEFINITION of 'Defalcation'

1. Combining two or more debts to create one total debt. Defalcation can be legally carried out upon request or in death of one of the parties.

2. Theft or misuse of funds which were under the control of the defalcator but not owned by them. Defalcation is a form of embezzlement through the allocation of funds, or failure to account for received funds.

INVESTOPEDIA EXPLAINS 'Defalcation'

1. For example if Peter had a $100 debt to Diana and Diana had a debt to Peter for $14, the debt could be combined. Peter would then owe Diana $86. This is not always legally possible without the consent of both parties.

2. The term defalcation is usually used in the context of public officials misappropriating public funds. There is a requirement of one party to be in control of someone else's account while allocating the funds in an inappropriate manner.

RELATED TERMS
  1. Debt Consolidation

    The act of combining several loans or liabilities into one loan. ...
  2. Consolidate

    The combining of assets, liabilities and other financial items ...
  3. Fiduciary

    1. A person legally appointed and authorized to hold assets in ...
  4. Duty

    1. A tax levied on certain goods, services or transactions. Duties ...
  5. Embezzlement

    A form of white-collar crime where a person misappropriates the ...
  6. Misappropriation Theory

    A perspective that defines the act of stealing confidential information ...
RELATED FAQS
  1. What's the difference between legal defalcation and illegal defalcation?

    Defalcation describes the failure of any one party to hand over or present funds that were entrusted to its care, but not ... Read Full Answer >>
Related Articles
  1. Retirement

    Designating A Trust As Retirement Beneficiary

    Designating a trust as your IRA beneficiary can be beneficial, but it requires proper planning to avoid problems.
  2. Professionals

    Meeting Your Fiduciary Responsibility

    Being a fiduciary comes with a certain level of responsibility. These four steps will reduce your liability when managing other people's money.
  3. Budgeting

    Debt Consolidation Made Easy

    These five steps can help get you out of debt faster and easier than you'd ever imagined.
  4. Professionals

    Ethical Issues For Financial Advisors

    Learn what to do when that devil on your shoulder begins to whisper.
  5. Professionals

    8 Ethical Guidelines For Brokers

    We examine the less obvious ethical dangers faced by a broker, and help you avoid trouble in ethical gray zones.
  6. Professionals

    An Introduction To Fiduciary Advisors

    Offering personalized solutions in a world of cookie-cutter advice may be your ticket to career perfection.
  7. Home & Auto

    Can You Trust Your Trustee?

    Ignorance and incompetence can cost you money. Make sure your trustee is up to the task.
  8. Options & Futures

    Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  9. Stock Analysis

    A New Economic Threat: State-Sponsored Hacking

    State sponsored hacking attempts are becoming a major cause of concern to the US. Here is a list of US sectors most vulnerable to state-sponsored hacking.
  10. Stock Analysis

    Why Should You Invest In Stratasys Today?

    When Stratasys pre-announced its fourth-quarter earnings, management highlighted that its MakerBot acquisition was underperforming expectations.

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center