A business bad debt is treated as a short-term capital loss and can be deducted only when it becomes completely worthless.

Business Bad Debt

Debt associated with the conduct of a trade or business that becomes worthless or uncollectible during the tax year.

Short-Term Capital Loss

A loss realized on the sale or exchange of a capital asset held for one year or less.

Completely Worthless

A term generally used to describe an asset that has lost all of its market value or has no foreseeable use or value.