Defalcation

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.

BREAKING DOWN '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. Embezzlement

    A form of white-collar crime where a person misappropriates the ...
  2. Debt Fund

    An investment pool, such as a mutual fund or exchange-traded ...
  3. Funded Debt

    A company's debt, such as bonds, long-term notes payables or ...
  4. Debt Load

    The amount of debt or leverage that a company is carrying on ...
  5. Debt Buyer

    A company that purchases debt from creditors at a discount. Debt ...
  6. Derivative

    A security with a price that is dependent upon or derived from ...
Related Articles
  1. Retirement

    Why Retirees Are Carrying More Debt Than Ever

    It was recently discovered that as people reach retirement they are carrying more debt than ever before.
  2. Investing

    Total Debt to Total Assets

    Total Debt to total assets, also called the debt ratio, is an accounting measurement that shows how much of a company’s assets are funded by borrowing. In business, borrowing is also called leverage.
  3. ETFs & Mutual Funds

    Selling Mutual Funds to Pay Off Your Debt

    Find out what you need to consider when evaluating whether selling investments in mutual funds to pay down personal debt is a good idea or a bad idea.
  4. Financial Advisor

    The 4 Best Debt Reduction Services

    It can be tricky to find the best debt reduction services for your financial situation. These top 4 debt consolidation firms help make the process easier.
  5. ETFs & Mutual Funds

    Top 4 Conservative Allocation Mutual Funds (VTMFX, TAIAX)

    Discover the top-rated mutual funds in the conservative allocation category, and learn which investors can utilize them most effectively.
  6. Investing

    Debt Ratio

    The debt ratio divides a company’s total debt by its total assets to tell us how highly leveraged a company is—in other words, how much of its assets are financed by debt. The debt component ...
  7. ETFs & Mutual Funds

    FBALX: Fidelity Balanced Fund Portfolio Trends in 2016

    Evaluate the composition of the Fidelity Balanced Fund, and examine how the fund's makeup has evolved between March 2015 and March 2016.
  8. Markets

    Does 2016 Spell the End of a Global Debt Cycle?

    Examine the growth of global debt from 2010 to 2015. Emerging market debt has grown significantly, while advanced economy debt has grown marginally.
  9. Investing

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  10. Retirement

    Should Balanced Funds Be Part Of Your Portfolio?

    Find out why you should include balanced funds in your portfolio, including the importance of customizability, diversification and professional management.
RELATED FAQS
  1. What's the difference between legal defalcation and illegal defalcation?

    Discover what is meant by the term ''defalcation'' and how it can be used in multiple contexts to describe illegal or legal ... Read Answer >>
  2. What's the difference between debt consolidation and debt management or debt settlement?

    Learn about different ways of handling debt when you become overwhelmed, including debt consolidation, debt management and ... Read Answer >>
  3. Why would you look at a company's net debt rather than its gross debt?

    Learn the difference between net debt and gross debt, how to calculate debt using a company's financial statements and why ... Read Answer >>
  4. Why is debt issued in both temporary and permanent forms?

    Debt is separated into two categories: 1) Temporary or short-term 2) Permanent or long-term. Temporary or short-term debt ... Read Answer >>
  5. Do mutual funds pay interest?

    Find out how and why some mutual funds pay interest, and which types of funds make regular dividend distributions to shareholders ... Read Answer >>
  6. What's the difference between debt consolidation and debt settlement?

    Learn the differences between negotiating a debt settlement with your existing creditors and applying for a new consolidation ... Read Answer >>
Hot Definitions
  1. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  2. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  3. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  4. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  5. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  6. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
Trading Center