Last editedFeb 20222 min read
A delinquent payment is a term used to describe a single missed payment on a contract, debt or loan. Payment delinquency can generally describe any missed payment or series of payments that haven’t been paid by their due date, though the term is most commonly applied to the very first missed payment.
Payment delinquency comes in a number of forms, mostly dependent on the circumstances of the missed payments for any form of financing, including mortgages, personal loans, credit card balances and student loans. A delinquent payment will usually result in consequences such as added interest on unpaid invoices or late fees, though this will depend on the type of loan and the circumstances of the payment delinquency.
Delinquent payments or default?
A term often confused with delinquent payments is default, though they are quite different. While a delinquent payment refers to a single missed payment, a debt going into default means enough payments have been missed for the lender to refer the problem to a debt collection agency.
Some contracts might put the borrower into default after one single missed payment, in which case both terms can technically be applied. However, default is a much more serious matter and thus would override the delinquency aspect.
Some types of loan have very specific time frames differentiating the delinquency period from default. For example, some student loans will consider the payment delinquent when it has not been paid up to 90 days after the due date. It will then remain delinquent until 270 days have passed before going into default. Obviously, the exact time frames will differ according to the details of each loan agreement.
Delinquent taxes UK
One financial payment that can have serious consequences for deliberate delinquency is with taxes. UK law provides the government with ‘enforcement actions’ with which they can secure the due payments from individuals, businesses and other entities that pay UK taxes.
These enforcement actions include:
Direct recovery of debts
Taking control of goods
Court action
Bankruptcy proceedings.
Direct recovery of debts
In many instances, especially those involving lower amounts owed, the government can take the money directly from the bank or building society account of the individual or entity that owes due taxes. This process is referred to as a ‘direct recovery of debts’.
Taking control of goods
The next level of enforcement action is ‘taking control of goods’, also referred to as ‘distraint’ in Northern Ireland. This is where the government seizes items or assets owned by the person or entity that owes taxes. The government then sells the seized items to pay the delinquent taxes. UK law also allows the government to charge additional fees to cover the processes involved while taking control of goods and selling them.
Court action
Another option for the government is to take the delinquent debtor to court. If successful, the debtor will be forced to pay their taxes and also the government’s court fees. This action will usually happen when the delinquent debtor disputes the amount of taxes they owe.
Bankruptcy proceedings
The biggest enforcement action available to the government is bankruptcy proceedings. This can happen with delinquent debts for different reasons including a steadfast refusal to pay, or the owed amount exceeding the worth of the debtor’s assets. Bankruptcy will close businesses down, while individuals can lose their homes, savings and investments.
Delinquency payment solutions
If you have a delinquency payment situation, it is usually possible to find a solution through communication between both parties. Whether you are the debtor or the lender, it is always much better for both parties to find a solution rather than to default on the debt.
A delinquency payment can be paid in full at a later date, or if the lender agrees then it can be spread out over future payments, resulting in the next payments being higher until the payment delinquency has been resolved.
We can help
If you’re interested in finding out more about delinquent payments, or any other aspect of your business finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.
