A financial default, non-payment of the debt or suspension of payments arises when a person or organization cannot face the payment of the interest or principal of a debt when the due date arrives. It occurs when a debtor cannot comply with the legal obligation to pay off his debt.
A debtor can declare default when he is unable to make the required payment or is not willing to pay that debt.
For example, when a person does not pay the receipt of their mortgage, they are said to have entered into default or default. It is also known as default when a company or a government does not pay a bond that has reached maturity.
To better understand the concept of default it is important to know the difference between insolvency, default and bankruptcy. Insolvency is the inability of a company to face the regular payment of its debts and a default or default is basically the fact of not paying a debt. Bankruptcy, on the other hand, is the situation in which a person enters by not paying their debt as a result of that insolvency. In legal terms, when a bankrupt company can declare an insolvency contest for the liquidation of its assets. The person who has not paid his debt (or goes into default) and will not be able to pay is known as failed.
The default is an Anglo-Saxon concept that is used above all to refer to the situation whereby a company stops paying debts and is declared in default by a rating agency . According to these rating agencies, for a debt default to be considered default, the debt must be private debt.