A debtor is an entity that owes a debt to another entity. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor. When the counterpart of this debt arrangement is a bank, the debtor is more often referred to as a borrower.
If X borrowed money from his/her bank, X is the debtor and the bank is the creditor. If X puts money in the bank, X is the creditor and the bank is the debtor.
It is not a crime to fail to pay a debt. Except in certain bankruptcy situations, debtors can choose to pay debts in any priority they choose. But if you’ve failed to pay a debt, you have broken a contract or agreement between you and a creditor. Generally, most oral and written agreements for the repayment of consumer debt – debts for personal, family or household purposes secured primarily by a person’s residence – are enforceable.
However, for the most part, debts that are business related must be made in writing to be enforceable by law. If the written agreement requires the debtor to pay a specific amount of money, then the creditor does not have to accept any lesser amount, and should be paid in full.
Also, if there was no actual agreement but the creditor has proven to have loaned an amount of money, undertaken services or given the debtor a product, the debtor must then pay the creditor.
There are many different types of debts, that can cause the debtor and creditor relationship to arise. Some of these areas include:
- Bank account debt
- Trade debtors (Most commonly used in Accounting terms)
- Car loan debt
- Credit card debt
- Council tax debt
- Gambling debt
- Legal court debt
- Loan shark debt
- Overdraft debt
- Parking fines
- Payday loan debt
- Personal loan debt
- Phone debt
- Utility bill debts
A creditor is a party (e.g. person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption (usually enforced by contract) that the second party will return an equivalent property and service. The second party is frequently called a debtor or borrower. The first party is the creditor, which is the lender of property, service or money.
The term creditor is frequently used in the financial world, especially in reference to short-term loans, long-term bonds, and mortgage loans. In law, a person who has a money judgment entered in their favor by a court is called a judgment creditor.
The term creditor derives from the notion of credit. Also, in modern America, credit refers to a rating which indicates the likelihood a borrower will pay back his or her loan. In earlier times, credit also referred to reputation or trustworthiness.
For more information please contact our office now to set up an appointment with attorney Daniel Lenghea to determine the best cause of action.