Failure to repay the outstanding amount (also known as “debt issues”) can cause negative implications for the debtor as late payments are considered as a breach of the contract signed by both sides (first party- creditor, and second party- client or in case of an outstanding payment- debtor). The consequences for not paying an amount due are as following:
A late payment may affect the subject’s credit report. The payment history along with old debts/overdue payments, etc. is the actual subject’s inputs. This is the base on which the overall credit score is calculated and it remains as a permanent record. A bad credit report determines future credit difficulties.
Unless the subject has a grace period and is still within it, there will be late fees and additional charges may apply. All this will be included in the debtor’s credit record and it will severely reflect one’s net billing statement.
When a debtor has a late payment, his credit score will drop. The payment history is part of the credit score and an old debt can drastically decrease it. Depending on the country, an old debt can stay on the debtor’s credit report for seven years. This will affect the debtor’s future purchases.
If the subject is already in debt, there is a big possibility that the company seeks professional help from a debt collection agency. In this case the debtor is be law-forced to pay his commission fees as well (e.g. GSA, check the Insolvency Law of Switzerland).
There are different reasons regarding why people fall behind with their payments, debt problems and defaulted amounts.