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. Small Business

    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. Investing

    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. Insights

    How Debt Limits A Country's Options

    While debt is fundamentally necessary to the operation of a national government, it can also be limiting and dangerous.
  5. 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.
  6. Investing

    Mutual Funds: Does Size Really Matter?

    The growth of mutual funds isn't always cause for celebration. Read on to find out why.
  7. Financial Advisor

    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.
  8. 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 ...
  9. Investing

    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.
  10. Insights

    How Countries Deal With Debt

    For many emerging economies, issuing sovereign debt is the only way to raise funds, but things can go sour quickly.
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. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center