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A debtor or debitor is a legal entity (legal person) that owes a
debt Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to ...

debt
to another entity. The entity may be an individual, a firm, a government, a company or other
legal person In law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by ...
. The
counterparty A counterparty (sometimes contraparty) is a legal entity, unincorporated entity, or collection of entities to which an exposure to financial risk might exist. The word became widely used in the 1980s, particularly at the time of the Basel I in 198 ...

counterparty
is called a
creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' party in 19th century Denmark A party is a gathering of people who have been invited by a host A host is ...

creditor
. When the counterpart of this debt arrangement is a
bank A bank is a financial institution Financial institutions, otherwise known as banking institutions, are corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), stat ...

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 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 In economics Economics () is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societie ...
- 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 Household debt is defined as the combined debt of all people in a household. It includes consumer debt In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economic ...
has passed the $11 trillion mark in the United States.
Student loan debt Student debt is a form of debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it fro ...

Student loan debt
will also soon pass the trillion-dollar mark. 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 Credit card debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she ...
*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 into accountancy and rely on
insolvency In accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporations. Accounting, which has been call ...
solutions to prevent debt from being left aside.


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 Covenant may refer to: Religion * Covenant (religion) In religion, a covenant is a formal alliance or agreement made by God with a religious community or with humanity in general. The concept, central to the Abrahamic religions The Abraha ...
in the debt contract. Default may occur if the debtor is either unwilling or unable to pay its
debt Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to ...

debt
. This can occur with all debt obligations including bonds,
mortgage A mortgage loan or simply mortgage () is a loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations etc. The recipient (i.e., the borrower) incurs a ...
s,
loan In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money avai ...
s, and
promissory note A promissory note, sometimes referred to as a note payable, is a legal instrument ''Legal instrument'' is a legal Law is a system of rules created and law enforcement, enforced through social or governmental institutions to regulate behav ...
s. If the debt owed becomes beyond the possibility of repayment, the debtor faces
insolvency In accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporations. Accounting, which has been call ...
or
bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' par ...

bankruptcy
; in the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and Telegraph' use Britain as a synonym for the United Kingdom. Some prefer to use Britain as shorth ...

United Kingdom
and some states of the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

United States
until the mid-19th century, debtors could be imprisoned in
debtor's prison A debtors' prison is a prison for Natural person, people who are unable to pay debt. Through the mid-19th century, debtors' prisons (usually similar in form to locked workhouses) were a common way to deal with unpaid debt in Western Europe.Cory, L ...
s, while in some countries such as
Greece Greece ( el, Ελλάδα, Elláda, ), officially the Hellenic Republic, is a country located in Southeastern Europe Southeast Europe or Southeastern Europe () is a geographical subregion A subregion is a part of a larger region In geogr ...

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 source that would not ordinarily be available to a Trustee in
Bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' par ...

Bankruptcy
.


Other uses

In the Latin version of the
Lord's Prayer The Lord's Prayer, also called the Our Father ( la, Pater Noster), is a central Christian prayer Christian prayer is an important activity in Christianity, and there are several different forms used for this practice. Christian prayers are div ...
, 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 Substitutionary atonement, also called vicarious atonement, is the idea that Jesus died "for us," as propagated by the Western classic and objective paradigms of atonement in Christianity, which regard Jesus in Christianity, Jesus as dying as a su ...
, which states that Jesus died on the cross as a propitiation, or substitute, for sinners.


See also

*
Administration order As a legal Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by its ...
*
Administrative receivership In law, receivership is a situation in which an institution or enterprise is held by a receiver—a person "placed in the custodial responsibility for the property Property (''latin: Res Privata'') in the Abstract and concrete, abstract is wha ...
*
Bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' par ...

Bankruptcy
*
Creditor's rights A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' party in 19th century Denmark A party is a gathering of people who have been invited by a host A host is ...
*
Debtors' prison A debtors' prison is a prison A prison (also known as a jail or gaol (dated, British, Australian, and to a lesser extent Canadian Canadians (french: Canadiens) are people identified with the country of Canada. This connection may b ...
*
Liquidation Liquidation is the process in accounting by which a company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal person, legal or a mixture of ...
* Simplified Individual Voluntary Arrangement * Protected Trust Deed (only available in Scotland)


References


External links


Insolvency Service websiteInsolvency Practitioners Association websiteInsolvency News
{{Authority control Debt