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I've heard word "default" used in a financial sense. My intuition tells me that the defaulting party is asking for protection against its creditors, but I don't see how that is different from say bankruptcy.

For example the "default" was used in this video.

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3 Answers 3

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It means to fail to fulfill an obligation, esp. to repay a loan or to appear in a court of law (OED).

http://en.wikipedia.org/wiki/Default_(finance)

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Default means to fail to perform some specific action that you are bound to do by law. For example, failing to make a debt payment. It is a very old word, originally meaning to sin or break the law. Here is what etymology online has to say:

early 13c., "offense, crime, sin," later (late 13c.) "failure, failure
to act," from O.Fr. defaute (12c.) "fault, defect, failure, culpability,
lack, privation," from V.L. *defallita "a deficiency or failure," pp. of
*defallere, from L. de- "away" (see de-) + fallere "to deceive, to cheat;
to put wrong, to lead astray, cause to be mistaken; to escape notice of,
be concealed from" (see fail). The financial sense is first recorded 1858;
the computing sense is from 1966.

It has nothing to do with bankruptcy, however, obviously if you are in financial trouble, you would default on your obligations, and that might well lead to lawsuits that would lead you to bankruptcy protection. However, they are not directly related in meaning.

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That is the legal sense, not the financial, which is more specific and what the OP was asking for. You are however right about the relation to bankruptcy, which is a legal finding that imposes court supervision over the financial affairs of those who are insolvent or in default. –  Harold Cavendish Jul 4 '11 at 19:09
    
@Harrold: they are the same sense, in fact. "Defaulting on a debt" is failing to make legally required repayment. –  user1579 Jul 5 '11 at 0:44
    
Default isn't exactly bankruptcy, but it leads to bankruptcy. Specifically, default is a failure to pay that might be "cured" tomorrow or the next day. But bankruptcy is basically a CONTINUED failure to pay, at least for the foreseeable future. –  Tom Au Jul 11 '11 at 20:49
    
"Act of default" actually means the same as "act of bankruptcy". But anything beyond 'they are closely related' is a legal point, not a language one. –  TimLymington Aug 19 '11 at 10:00

The sense you keep hearing about means "failing to repay a bond (loan) on time". The US has borrowed a tidy sum of money ($14 trillion -- about $47,000 per US citizen) and it isn't clear that it will be able continue making the promised payments on that debt. If it doesn't (the government "defaults"), well, we're all screwed.

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