In international trade, default is failure to meet the legal obligations (or conditions) of a loan. A national sovereign default is the failure or refusal of a government to repay its national debt. Default can be of two types:
- Debt services default: occurs when the borrower has not made a scheduled payment of interest or principal.
- Technical default occurs when an affirmative or a negative covenant is violated.
Sovereign borrowers such as nations generally are not subject to bankruptcy courts in their own jurisdiction, and thus may be able to default without legal consequences.