Understanding Unpaid Debts: Exploring the Concept of Arrears

What are Arrears?

Arrears refer to payments for goods or services that have not been received. These payments could be overdue or due once a product or service has been fulfilled.

Arrears are not necessarily overdue payments, but could also mean paying for a good or service after the fact. For example, businesses can receive arrears from their customers or make payments in arrears to vendors or employees.

Let's consider a scenario where you provide accounting services to a business. If you bill in arrears, you only ask for payment after completing your work, providing flexibility for both parties involved.

How Arrears Work

In some cases, arrears may be a result of overdue payments. For example, if you miss a payment to a printing company in September, the payment you make in October will be in arrears for September.

When it comes to billing in arrears, there are pros and cons to consider. On the positive side, billing in arrears can lead to greater payment accuracy and flexibility for customers. However, it may also result in delayed payments or lost payments for the service provider.

What Arrears Means for Child Support

In divorce cases involving child support, arrears refer to the unpaid child support payments that a noncustodial parent fails to make. The custodial parent may take legal action to collect these overdue payments.

There are two types of child support arrears: assigned and unassigned. Assigned arrears are payments that go to the state for child support, while unassigned arrears must be paid directly to the custodial parent.

If a custodial parent wants to forgive child support arrears, they can do so by submitting a waiver. Each state has its own laws regarding child support arrears and waivers.

Key Takeaways

Arrears describe the status of payments based on their due dates, whether they are overdue or due after a product or service has been fulfilled. Businesses can receive or make payments in arrears, while in family law, arrears refer to past-due child support payments.