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A debtor or debitor is a legal entity (legal person) 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 their 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 one fails to pay a debt, they have broken a contract or agreement between them 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.
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.
The history of the term “debtor”
Anthropologist David Graeber suggests in Debt: The First 5000 Years that trading began with some form of credit namely the promise to pay later for already handed over goods. Because of this it can be said that debtors and creditors existed even before the implementation of coinage.
The term debtor comes from the word debt, which originated from the French word dette, which came from the Latin word debere, meaning to owe.
Types of debtors
According to numbers released on March 31, 2013 by the U.S. Federal Reserve Board, household debt has passed the $11 trillion mark in the United States. Student loan debt will also soon [when?] pass the trillion-dollar mark.
There are many different types of debts which 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
Being a debtor is not restricted to an individual, as in business there is also company debt. Many companies heavily invest in accountancy and rely on insolvency solutions to prevent debt from being left aside.
Legislation
In the United Kingdom, the Administration of Justice Act 1970 protects debtors from harassment intended to coerce payment of a debt.
Default
Default occurs when the debtor has not met its legal obligations according to the debt contract, e.g.- it has not made a scheduled payment, or has violated a covenant in the debt contract. Default may occur if the debtor is either unwilling or unable to pay its debt. This can occur with all debt obligations including bonds, mortgages, loans, and promissory notes.
If the debt owed becomes beyond the possibility of repayment, the debtor faces insolvency or bankruptcy; in the United Kingdom and some states of the United States until the mid-19th century, debtors could be imprisoned in debtor's prisons, while in some countries such as Greece debtors are still imprisoned.
Debtor in Bankruptcy and Individual Voluntary Arrangements
An Individual Voluntary Arrangement is a legally binding arrangement supervised by a licensed Insolvency Practitioner, the purpose of which is to enable an individual, sole trader or Partner ("the Debtor") to reach a compromise with his creditors and avoid the consequences of bankruptcy. The compromise should offer a larger repayment towards the creditor's debt than could otherwise be expected were the Debtor to be made bankrupt. This is often facilitated by the Debtor making contributions to the arrangement from his income over a designated period or from a third party contribution or other sources that would not ordinarily be available to a Trustee in Bankruptcy.
Other uses
In the Latin version of the Lord's Prayer, the words Et dimitte nobis debita nostra/Sicut et nos dimittimus debitoribus nostris, the words Debtor and Debt are sometimes translated as Sinner and Sin. This particular understanding of sin, as a form of debt that humanity inherits, is related to the soteriological theory of substitutionary atonement, which states that Jesus died on the cross as a propitiation, or substitute, for sinners.
See also
- Administration order
- Administrative receivership
- Bankruptcy
- Creditor's rights
- Debtors' prison
- Liquidation
- Simplified Individual Voluntary Arrangement
- Protected Trust Deed (only available in Scotland)
References
- "Debtor". Investopedia. Retrieved 2014-08-23.
- "Debt: The first 5000 years" (PDF). Unwelcome Guests. Archived from the original (PDF) on 2014-07-04. Retrieved 2014-08-21.
- "debt". Dictionary.com. Retrieved 2014-08-27.
- "Budgeting and Debt – Types of Debt". Investopedia. Archived from the original on 2014-08-13. Retrieved 2014-08-24.
- "Types of Debt". Stepchange. Retrieved 2014-09-04.
- UK Legislation, Administration of Justice Act 1970, section 40, accessed on 11 July 2024
- "Default". Investopedia. Retrieved 2014-11-12.
- "A guide to individual voluntary agreements". McTear Williams & Wood. Retrieved 2014-11-12.
- "Debt". Merriam-Webster. Retrieved 2014-11-12.
External links
- Insolvency Service website
- Insolvency Practitioners Association website
- Insolvency News
This article needs additional citations for verification Please help improve this article by adding citations to reliable sources Unsourced material may be challenged and removed Find sources Debtor news newspapers books scholar JSTOR November 2014 Learn how and when to remove this message A debtor or debitor is a legal entity legal person 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 their 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 one fails to pay a debt they have broken a contract or agreement between them 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 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 The history of the term debtor Anthropologist David Graeber suggests in Debt The First 5000 Years that trading began with some form of credit namely the promise to pay later for already handed over goods Because of this it can be said that debtors and creditors existed even before the implementation of coinage The term debtor comes from the word debt which originated from the French word dette which came from the Latin word debere meaning to owe Types of debtorsAccording to numbers released on March 31 2013 by the U S Federal Reserve Board household debt has passed the 11 trillion mark in the United States Student loan debt will also soon when pass the trillion dollar mark There are many different types of debts which 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 Being a debtor is not restricted to an individual as in business there is also company debt Many companies heavily invest in accountancy and rely on insolvency solutions to prevent debt from being left aside LegislationIn the United Kingdom the Administration of Justice Act 1970 protects debtors from harassment intended to coerce payment of a debt DefaultDefault occurs when the debtor has not met its legal obligations according to the debt contract e g it has not made a scheduled payment or has violated a covenant in the debt contract Default may occur if the debtor is either unwilling or unable to pay its debt This can occur with all debt obligations including bonds mortgages loans and promissory notes If the debt owed becomes beyond the possibility of repayment the debtor faces insolvency or bankruptcy in the United Kingdom and some states of the United States until the mid 19th century debtors could be imprisoned in debtor s prisons while in some countries such as Greece debtors are still imprisoned Debtor in Bankruptcy and Individual Voluntary ArrangementsAn Individual Voluntary Arrangement is a legally binding arrangement supervised by a licensed Insolvency Practitioner the purpose of which is to enable an individual sole trader or Partner the Debtor to reach a compromise with his creditors and avoid the consequences of bankruptcy The compromise should offer a larger repayment towards the creditor s debt than could otherwise be expected were the Debtor to be made bankrupt This is often facilitated by the Debtor making contributions to the arrangement from his income over a designated period or from a third party contribution or other sources that would not ordinarily be available to a Trustee in Bankruptcy Other usesIn the Latin version of the Lord s Prayer the words Et dimitte nobis debita nostra Sicut et nos dimittimus debitoribus nostris the words Debtor and Debt are sometimes translated as Sinner and Sin This particular understanding of sin as a form of debt that humanity inherits is related to the soteriological theory of substitutionary atonement which states that Jesus died on the cross as a propitiation or substitute for sinners See alsoAdministration order Administrative receivership Bankruptcy Creditor s rights Debtors prison Liquidation Simplified Individual Voluntary Arrangement Protected Trust Deed only available in Scotland References Debtor Investopedia Retrieved 2014 08 23 Debt The first 5000 years PDF Unwelcome Guests Archived from the original PDF on 2014 07 04 Retrieved 2014 08 21 debt Dictionary com Retrieved 2014 08 27 Budgeting and Debt Types of Debt Investopedia Archived from the original on 2014 08 13 Retrieved 2014 08 24 Types of Debt Stepchange Retrieved 2014 09 04 UK Legislation Administration of Justice Act 1970 section 40 accessed on 11 July 2024 Default Investopedia Retrieved 2014 11 12 A guide to individual voluntary agreements McTear Williams amp Wood Retrieved 2014 11 12 Debt Merriam Webster Retrieved 2014 11 12 External linksInsolvency Service website Insolvency Practitioners Association website Insolvency News
