So, in your given example you speak of Germany after WW1. Germany paid the reparations in the beginning, however, in 1923 they defaulted on a payment and French soldiers invaded the ruhr which has been called "the heartland of the German economy". This is because the german economy relied extremely heavily upon this area. After the invasion, many of the workers went on strike but what's interesting is that the government supported them.

This meant that they were paying the wages of workers who weren't working and inflation begun. In an attempt resolve the matter, the government began to print money at an extremely accelerated rate.

This led to hyperinflation were the value of money essentially became worthless. There was nothing to back it up and the economy spiralled out of control. People began to carry their wages in wheel barrows and would run to stores to buy bread before the prices rose. Soon thereafter people simply bartered objects because the money held no value. The middle class experienced hunger for the first time as they lost years worth of savings. Many sold their family heirlooms simply to get food. This left them disillusioned with the government and would have major political ramifications in the years to come.

The crisis of '23 was only ended when a politician by the name of Gustav Stresseman stepped in. He essentially ended the strike in the Ruhr and repaired the economy (to an extent) by creating the new German rentenmark (soon replaced with the reichsmark). He rearranged the payments due to the French and they left the ruhr.

Over the next few years, Stresemann rook Germany through the so-called "golden years" (a facade of prosperity which his underlying issues). He was able to reduce the debt significantly and the time between payments.

In a more direct answer to your question, in the case of Germany, when they missed a payment they were invaded by French soldiers and due to subsequent decisions by the government, the economy was destroyed.