Arrearages Legal Definition: Everything You Need to Know

This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional. The word arrears means “end of period” when referring to annuities (an annuity is series of equal amounts occurring at equal time intervals, such as £1,000 per month for 20 years). If the recurring amount comes at the end of each period, the annuity is described as an annuity in arrears or as an ordinary annuity. For example, you borrow £10,000 on September 30 and your first monthly payment will be due on October 31, the second payment will be due on November 30, and so on.

• Arrears also form an important part of accounting practices, which allows for a better way of managing small business cash flow.
• If you continue making regular payments each month after that, you are still in arrears for $500 until the time you make up the payment you missed.
• It basically allows space to get what you need before meeting your obligations.
• Conduct regular accounts payable audits to be sure you are current.
• When the bill becomes overdue—say 30 days past the due date for payment—the account falls into arrears and the account holder may get a late notice and/or penalty.

These types of payments are referred to as payment in advance. When the bill becomes overdue—say 30 days past the due date for payment—the account falls into arrears and the account holder may get a late notice and/or penalty. Being in arrears may or may not have a negative connotation depending on how the term is used. In some cases, such as bonds, arrears can refer to payments that are made at the end of a certain period. Similarly, mortgage interest is paid in arrears, meaning each monthly payment covers the principal and interest for the preceding month.

If one or more payments have been missed where regular payments are contractually required, such as mortgage or rent payments and utility or telephone bills, the account is in arrears. Payments that are made at the end of a period are also said to be in arrears. In this case, payment is expected to be made after a service is provided or completed—not before. If you’re paying in arrears, whether it’s payroll or for services rendered, it’s important to stay up to date on your accounts. Conduct regular accounts payable audits to be sure you are current.

These examples are programmatically compiled from various online sources to illustrate current usage of the word ‘arrearage.’ Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors. If you note that a debtor is seriously in arrears, you may consider suspending business with them until they bring their accounts current. The IV-D program (pronounced Four-D) is the technical name for government
administered Child Support Enforcement Programs. The term “IV-D” comes from
Title IV-D of the Social Security Act, which is the program’s federal
enabling statute. In Connecticut, a case is considered IV-D if the family
has received public assistance benefits or if an application for services
was filed with either the Department of Social Services or the Support
Enforcement Unit. It generally implies that part of the money already has been paid.

How to pronounce arrearage?

When a company doesn’t pay out dividends to shareholders, these dividends accumulate, meaning that in the future it’s required that the company pay arrearage to stockholders before current dividends. Take the example of a telecom corporation that has a cumulative preferred stock with an annual dividend amount of $20,000. If this company has omitted the dividends for the past five years, then there is $100,000 of dividends in arrears. Arrearage also applies to dividends that are due but have not been paid to preferred shareholders. Because preferred shares have guaranteed dividends regardless of whether the company makes a profit or not, dividends are said to be in arrears if the company misses a cumulative dividend payment.

• Arrearages broadly refers to being in arrears or owing a debt.
• These payments are known as payment in arrears, occur at the end of the period, and are not classified as late.
• Money remaining unpaid after it becomes due as rent unpaid
  interest remaining due Pow.
• Mortgages, Index, h.t.; a sum of money
  remaining in the hands of an accountant.

These payments are known as payment in arrears, occur at the end of the period, and are not classified as late. They do, however, fall into arrears if you don’t pay them by the due date. An arrears swap is an interest rate swap that is similar to a regular, or plain vanilla swap, but the floating payment is based on the interest rate at the end of the reset period, instead of the beginning, and is then applied retroactively. For example, if your $500 loan payment is due on Jan. 15 and you miss the payment, you are in arrears for $500 as of the next business day.

Definition of Arrearage

Arrears refers to the actual unpaid obligation to a debt, while arrearage refers to the condition of being in debt. Learn more about what it means to be in arrears, and all you need to know about arrearage, what it means for the debts you owe or are owed, and the effect it has on your finances. More
information about child support services provided by the Attorney General. More information about
paternity orders and other child support services provided by the Dept. of
Social Services. An in-arrears swap is an interest rate swap that sets (fixes) the interest rate and pays the interest at the end of the coupon period. In contrast, a standard swap sets the interest rate in advance, at the beginning of the coupon period, and pays the interest in arrears, at the end of the coupon period.

Interest in Arrears (Bonds)

Keep tabs on everyone that owes you money, and if your debtors are constantly behind on payments it could be a sign of a serious problem. When two parties come to an agreement in a contract, payment is usually made before or after a product or service is provided. Payment made before a service is provided is common with rents, leases, prepaid phone bills, insurance premium payments, and Internet service bills.

Other Idioms and Phrases with arrears

Current pay would instead occur as payroll and processed each period as it ends. Arrears, or arrearage in certain cases, can be used to describe payments in many different parts of the legal and financial industries, including the banking and credit industries, and the investment world. The term can have many different applications depending on the industry and context in which it is used.

Understanding Arrears

The dividends in arrears must be disclosed in the footnotes to the financial statement. The company is also restricted from making any dividend payouts to common shareholders until it settles its dividends payable account. The term is usually used in relation with periodically-recurring payments such as rent, bills, royalties (or other contractual payments), and child support. To qualify as dividends in arrears when unpaid, the dividends must be for the kind of preferred stock that has the so-called “cumulative” feature. Cumulative preferred stock allows for the accumulation of any undeclared preferred dividends from prior periods and the preferential distribution in later periods, before any new dividends and common dividends.

Words Nearby arrears

Another example involves preferred stocks where a business is in arrears and must pay back the owed debt before paying other shareholders. The arrearages legal definition what is collateral in business is the amount of a loan, shares of a preferred stock, or any other form of credit which is overdue. Arrears is another term that means the same thing as arrearages.

Money remaining unpaid after it becomes due as rent unpaid
interest remaining due Pow. Mortgages, Index, h.t.; a sum of money
remaining in the hands of an accountant. Arrears refers to a debt or payment that is still outstanding after the payment due date has passed.

As noted above, arrears generally refers to any amount that is overdue after the payment due date for accounts such as loans and mortgages. Accounts can also be in arrears for things like car payments, utilities, and child support—any time you have a payment due that you miss. Arrears also form an important part of accounting practices, which allows for a better way of managing small business cash flow. A net 30 arrearage, for example, promises payment within 30 days.

Not in certain contexts, such as in bond trading, when arrears is a reference to payments that are made at the end of a specified period. Mortgage interest payments are paid in arrears and only suggest a negative connotation when the due date has passed. Arrears can also be applied to instances in the context of finance. An annuity such as a loan repayment is a series of equal amounts of payment that occurs at equal time intervals—say for $250 per month for 10 years. If the annuities are due at the end of the period such as mortgage payments, they are called an ordinary annuity or annuity in arrears.

Arrears is a financial and legal term that refers to the status of payments in relation to their due dates. The word is most commonly used to describe an obligation or liability that has not received payment by its due date. Payment at the end of a period is referred to by the singular arrear, to distinguish from past due payments.