Business, Legal & Accounting Glossary
A person or organisation that owes money to the entity. Someone who has the obligation of paying a debt.
A debtor is a person or entity that owes money to another person or entity (the creditor). The entity may be an individual, a firm, a government, a company or other legal person. A debtor is said to be insolvent when unable to meet the obligations of its debts. A debtor is said to bankrupt when declared insolvent by a court. The large established corporation is almost always a debtor by choice as sound financial management often dictates that some capital can be obtained less expensively by debt rather than equity. Any individual having mortgages, student loans, credit card balances, or other debts outstanding is a debtor. Even a government can be a debtor, too, by borrowing from other governments or from investors. The etymology of the word debtor can be traced back to the Latin verb meaning to owe.
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.
Debtor is one of the account balances in financial statements. Usually, it is presented as one of the current assets.
In writing ledger accounts, a debtor’s amount is written on the debit (Dr) side, as the name suggests. Debtor, as it appears in the balance sheet, connotes same meaning as the accounts receivable (USA accountancy). In other words, a Debtor is someone who owes you money. It is the opposite of a Creditor who is someone to whom you owe money.
In economics, a debtor (or a borrower) owes money to a creditor.
If the money 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.
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 loan covenant (condition) of the debt contract. A default may occur if the debtor is either unwilling or unable to pay their debt. This can occur with all debt obligations including bonds, mortgages, loans, and promissory notes.
If the money 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 the practice of imprisoning debtors is still practised.
In the early 1950’s the UK was the world’s largest debtor nation and the US the largest creditor.
It was clear that the debtor had not communicated with his accountant.
The debtor was summoned before the court for failure to pay.
He had been considering the option of charging a trust on the debtor.
There was no evidence that the debtor would have qualified financially for legal aid.
The court then issues a summons and serves it to the debtor, usually by post.
At the beginning of the 1990’s, the United States was the largest debtor nation in history.
After repeated but fruitless demands for payment, the company brought a suit against the debtor.
The bank officials argued that it is not within their remit to chase down every asset of every debtor.
The undesired impact of the new legislation was it relieved the debtor of all liability for their debts.
It creates a indisputable record which your debtor can not deny agreeing to.
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This glossary post was last updated: 1st May, 2020 | 7 Views.