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  1. Bankruptcy Glossary
  2. Delinquency

What is Delinquency?

If the Debtor makes a payment after the bill's due date the debtor is charged a late fee and the payment for the loan amount is considered delinquent. Payments which are not paid for more than 30 days may be reported to a credit bureau agency and affect the borrower's credit score. If payments are not made for several months contractually the borrower may be within their legal rights to repossess the property.

There has been a sharp increase in delinquent home mortgage and credit card payments in the United States. Increased delinquency rates have been caused by the downturn in the economy, the decease in the housing market, loss of jobs, lax lending standards and consumers borrowing more money than they can repay.

Delinquency is the first step to defaulting on a loan and can cause:

  • Additional charges to be charged against the borrower for failing to make the loan payments within the time frame specified on the bill or loan agreement.
  • Damaged credit ratings for the borrowers which can affect the borrower's ability to get loans in the future and receive low interest rates to borrow money.
  • Can allow the lender to repossess the property or foreclose on the home. Foreclosure can have a devastating affect on the borrower's credit score and make it difficult to borrower money in the future.

If the delinquent debt is unsecured the lender can hire a collection agency to contact the borrower and attempt to collect at least a portion of the outstanding debt.