Arrearages broadly refers to being in arrears or owing a debt. There are two main uses of the term. One refers to payments in arrears that are meant to occur after they are owed, such as wages paid a week after time is entered or for invoices. Arrearage also can mean a person or business that is behind on paying bills, debts, or other obligations. When being used in this form, arrearage often involves debts piling up over time, signaling a warning of insolvency. The term can be used in a variety of contexts. For example, individuals responsible for paying child support and alimony may be referred to as paying in arrears when behind on the payments. Another example involves preferred stocks where a business is in arrears and must pay back the owed debt before paying other shareholders. Many of the issues that arise involving arrearages, besides bankruptcy, is whether the person or business owes more for being late on payments, whether the overdue debts must be paid before other bills, and whether the person or entity should be restricted from making certain transactions or entering into new debt.
[Last updated in December of 2021 by the Wex Definitions Team]