Posted in Finance, Accounting and Economics Terms, Total Reads: 142
Definition: Debt Fatigue
Debt fatigue is defined as a scenario wherein a person who has taken a debt does not bother about repayment of the debt and continues to spend his money for various other expenses. Normally during a debt fatigue, the businessman may eventually file for a bankruptcy and may seek governments support in a buyout to relieve him from the burden.
A Debt fatigue eventually results in bankruptcy due to the person defaulting payment on his debts and also due to the continuous spending on other expenses which has nothing to do with the business. Lehman Brothers in 2008 filed for bankruptcy following a debt fatigue which had led to the Global recession. Air India as a company has faced debt fatigue and many a times, the Indian government has financially helped it by through financing to keep the operations working.
Debt fatigue occurs when then person is not able to repay the amount that he has borrowed from his creditors but continues to spend in various other expenses related to his own business or personal. For example, Vijay Mallya’s Kingfisher Airlines developed a debt fatigue as it was not able to repay its debt and finally filed for bankruptcy.