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jeezerz
Returning Member

How to write off a bad debt from a court awarded judgement against a contractor?

In 2021 an EF4 tornado damaged my property and the city it was in was declared a federal disaster by Joe Biden. I paid a contractor to make repairs and the contractor abandoned the project after doing partial work. I then had to take them to court and won a judgement for $10,000. The legal fees it cost me were close to the same amount and I believe this cannot be deducted.

 

From there I had to hire a collection agency to make a recovery of the awarded judgement. The Discovery letter and Motion to Compel have not been replied to by the contractor. They are ignoring and not going to pay.

 

Since the damage was in a federally declared disaster area, and since I have tried to recover the judgement amount and can not,  I am planning to take this as a deduction in 2025 and wanted to know what the correct forms and steps are. Can anyone guide / advise me on this?

 

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2 Replies
M-MTax
Level 14

How to write off a bad debt from a court awarded judgement against a contractor?

jeezerz
Returning Member

How to write off a bad debt from a court awarded judgement against a contractor?

In that example the contractor company filed for bankruptcy. In my case the contractor company is ignoring all legal actions the collection agency has tried. I would think that shows a reasonable attempt on my part to collect the debt and can now write it off this year?

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