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Adebtor ordebitor is alegal entity (legal person) that owes adebt to another entity. The entity may be an individual, a firm, a government, a company or otherlegal person. Thecounterparty is called acreditor. When the counterpart of this debt arrangement is abank, the debtor is more often referred to as aborrower.
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 ofconsumer debt – debts for personal, family or household purposes secured primarily by a person's residence – are enforceable.[1]
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.
Anthropologist David Graeber suggests inDebt: 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.[2]
The term debtor comes from the worddebt, which originated from the French worddette, which came from the Latin worddebere, meaning to owe.[3]
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.[4]
There are many different types of debts which can cause the debtor and creditor relationship to arise.[5] Some of these areas include:
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 oninsolvency solutions to prevent debt from being left aside.
In the United Kingdom, theAdministration of Justice Act 1970 protects debtors fromharassment intended to coerce payment of a debt.[6]
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 acovenant in the debt contract. Default may occur if the debtor is either unwilling or unable to pay itsdebt. This can occur with all debt obligations includingbonds,mortgages,loans, andpromissory notes.[7]
If the debt owed becomes beyond the possibility of repayment, the debtor facesinsolvency orbankruptcy; in theUnited Kingdom and some states of theUnited States until the mid-19th century, debtors could be imprisoned indebtor's prisons, while in some countries such asGreece debtors are still imprisoned.
AnIndividual Voluntary Arrangement is a legally binding arrangement supervised by a licensedInsolvency 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 inBankruptcy.[8]
In the Latin version of theLord's Prayer, the wordsEt dimitte nobis debita nostra/Sicut et nos dimittimus debitoribus nostris, the wordsDebtor andDebt are sometimes translated asSinner andSin. This particular understanding of sin, as a form of debt that humanity inherits, is related to the soteriological theory ofsubstitutionary atonement, which states that Jesus died on the cross as a propitiation, or substitute, for sinners.[9]
