Debtor
Encyclopedia
A debtor is an entity that owes a debt
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...

 to someone else. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty
Counterparty
A counterparty is a legal and financial term. It means a party to a contract. A counterparty is usually the entity with whom one negotiates on a given agreement, and the term can refer to either party or both, depending on context....

 is called a creditor
Creditor
A creditor is a party that has a claim to 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 that the second party will return an equivalent property or...

. When the counterparts of this debt
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...

 arrangement is a bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...

, the debtor is more often referred to as a borrower.

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
Loan covenant
A loan covenant is a condition in a commercial loan or bond issue that requires the borrower to fulfill certain conditions or which forbids the borrower from undertaking certain actions, or which possibly restricts certain activities to circumstances when other conditions are met.Typically,...

 in the debt contract. Default may occur if the debtor is either unwilling or unable to pay its debt
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...

. This can occur with all debt obligations including bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...

, mortgage
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...

s, loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....

s, and promissory note
Promissory note
A promissory note is a negotiable instrument, wherein one party makes an unconditional promise in writing to pay a determinate sum of money to the other , either at a fixed or determinable future time or on demand of the payee, under specific terms.Referred to as a note payable in accounting, or...

s.

If the debt owed becomes beyond the possibility of repayment, the debtor faces insolvency
Insolvency
Insolvency means the inability to pay one's debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts.Business insolvency is defined in two different ways:...

 or bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....

; in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 and some states of the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 until the mid-19th century, debtors could be imprisoned in debtor's prison
Debtor's prison
A debtors' prison is a prison for those who are unable to pay a debt.Prior to the mid 19th century debtors' prisons were a common way to deal with unpaid debt.-Debt bondage in ancient Greece and Rome:...

s, while in some countries such as Greece
Greece
Greece , officially the Hellenic Republic , and historically Hellas or the Republic of Greece in English, is a country in southeastern Europe....

 the practice of imprisoning debtors is still practiced.

Debtor in Bankruptcy and Individual Voluntary Arrangements

An Individual Voluntary Arrangement
Individual Voluntary Arrangement
In the UK, an Individual Voluntary Arrangement is a formal alternative for individuals wishing to avoid bankruptcy.The IVA was established by and is governed by Part VIII of the Insolvency Act 1986 and constitutes a formal repayment proposal presented to a debtor's creditors via an Insolvency...

 is a legally binding arrangement supervised by a licensed Insolvency Practitioner
Insolvency practitioner
In the United Kingdom, only an authorised or licensed Insolvency Practitioner may be appointed in relation to formal insolvency procedures.Quite often IPs have an accountancy background...

, 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
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....


Other uses

In the Latin version of the Lord's Prayer
Lord's Prayer
The Lord's Prayer is a central prayer in Christianity. In the New Testament of the Christian Bible, it appears in two forms: in the Gospel of Matthew as part of the discourse on ostentation in the Sermon on the Mount, and in the Gospel of Luke, which records Jesus being approached by "one of his...

, 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
Technically speaking, substitutionary atonement is the name given to a number of Christian models of the atonement that all regard Jesus as dying as a substitute for others, "instead of" them...

, which states that Jesus died on the cross as a propitiation, or substitute, for sinners.

See also

  • Administration order
  • Administrative receivership
  • Bankruptcy
    Bankruptcy
    Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....

  • Creditor's rights
    Creditor's rights
    Creditor's rights is a legal term used to describe the set of procedural provisions designed to protect the ability of creditors - persons who are owed money - to collect the money that they are owed...

  • Debtors' prison
  • Liquidation
    Liquidation
    In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...

  • Simplified Individual Voluntary Arrangement
    Simplified Individual Voluntary Arrangement
    In the United Kingdom, a Simplified IVA was a proposed new form of IVA , which would have been a formal alternative of clearing debt without being declared bankrupt.The new regime was likely to have been two tiers:...

  • Protected Trust Deed
    Protected Trust Deed
    A trust deed is a voluntary but formal arrangement that is used by Scottish residents where a debtor grants a ‘trust deed’ in favour of the trustee which transfers their estate to the trustee for the benefit of creditors. It can be a way for people to deal with debt problems...

    (only available in Scotland)

External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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