What Does Debtor Mean?
A debtor is an entity that owes a debt to someone else. The entity may be an individual, a firm, a government, a company or other legal person.
The counterparty is called a creditor. When the counterparts of this debt arrangement is a bank, the debtor is more often referred to as a borrower.
A company or individual who owes money. If the debt is in the form of a loan from a financial institution, the debtor is referred to as a borrower.
If the debt is in the form of securities, such as bonds, the debtor is referred to as an issuer.
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 you've failed to pay a debt, you have broken a contract or agreement between you 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.
However, most debts for business or commercial purposes must be in writing to be enforceable. If the agreement requires the debtor to pay a certain
amount of money, then the creditor does not have to accept a lesser amount. Also, if there was no actual agreement but the creditor has loaned money,
performed services or provided the debtor with a product, that debtor must pay the creditor.
What is Bankruptcy
Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a business or corporate debtor ("involuntary bankruptcy") in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor (a "voluntary bankruptcy" that is filed by the insolvent individual or organization). An involuntary bankruptcy petition may not be filed against an individual consumer debtor who is not engaged in business.