Potential Signs of Default
Specializing in government contract law, the attorneys at Malyszek & Malyszek are very knowledgeable in defaults. We will help you to understand the issues with your case whether it be a technical default or a debt services default.
Default is failure to meet the legal obligations of a loan. For example when a home buyer fails to make a mortgage payment, or when a corporation fails to pay a bond which has reached development. A national default is the failure of a government to repay its national debt.
There are two types of default: technical default and debt services default. Debt service default occurs when the borrower has not made a scheduled payment of interest. Technical default occurs when an affirmative or a negative contract is dishonored.
Affirmative agreements are clauses in debt contracts that require firms to maintain certain financial ratios. The most frequently violated restrictions in affirmative agreements are short term liquidity, material net worth, and debt service coverage.
Negative agreements may be continuous or incurrence-based. Violations of negative agreements are rare compared to violations of affirmative agreements. Negative agreements are clauses in debt contracts that limit corporate actions that could impair the position of creditors.
If the debtor defaults on any debt to the lender, a cross default agreement in the debt contract states that the particular debt is also in default. With most debt, an agreement is included in the debt contract which states that the total amount owed becomes payable on the first instance of a default of payment.
Consumer default concerns areas in consumer credit, rent or mortgage payments, or utility payments. An analysis identified certain risk groups, such as single households, being unemployed, being young, being unable to rely on social networks, etc. Even internet illiteracy has been associated with increased default, caused by these households being less likely to find their way to the social benefits they are entitled to. While effective non-legal debt counseling is usually the preferred option, consumer default can end in legal debt settlement or consumer bankruptcy procedures, ranging from 1-year procedures in the UK to 6-year procedures in Germany.
With over 40 years of experience, Malyszek & Malyszek will assist you with a variety of matters. Call Malyszek & Malyszek today for more information regarding your case.
