Creditor

Loading the player...

What is a 'Creditor'

A creditor is an entity (person or institution) that extends credit by giving another entity permission to borrow money if it is paid back at a later date. Creditors can be classified as either "personal" or "real." Those people who loan money to friends or family are personal creditors. Real creditors (i.e. a bank or finance company) have legal contracts with the borrower granting the lender the right to claim any of the debtor's real assets (e.g. real estate or car) if he or she fails to pay back the loan.

BREAKING DOWN 'Creditor'

When creditors are notified of bankruptcy proceedings, they have a couple of options with respect to their claim against the debtor:

1. They can share in any distribution from the bankruptcy estate according to the priority of their claim. Most unsecured, non-wage claims come low on the priority list.

2. They can take the debtor to court and challenge a debtor's discharge (the right not to pay back) due to bankruptcy protection.

RELATED TERMS
  1. Preferred Creditor

    An individual or organization that has priority in being paid ...
  2. Charging Order

    A court-authorized right granted to a judgment creditor to attach ...
  3. Receiver

    A person appointed by a bankruptcy court or secured creditor ...
  4. Secured Creditor

    Any creditor or lender that takes collateral for the extension ...
  5. Automatic Stay

    A legal provision that temporarily prevents creditors from pursuing ...
  6. Collection-Proof

    A debtor who doesn’t have any assets that a creditor can collect ...
Related Articles
  1. Markets

    What's a Debtor?

    A debtor​ is an individual or company that owes money.
  2. Markets

    5 Myths About Personal Bankruptcy

    There are some persistent myths that hover over the process of bankruptcy that are either half-truths or completely false.
  3. Investing

    Alternatives To Business Bankruptcy

    Bankruptcy isn't the only alternative for a struggling business. It can try negotiating with creditors or liquidating assets outside the U.S courts.
  4. Markets

    What Does Liquidation Mean?

    Creditors liquidate assets to try and get as much of the money owed to them as possible.
  5. Investing

    Changing The Face Of Bankruptcy

    A 2005 law attempts to unmask fraudulent debtors and still save those who are struggling. Will it affect you?
  6. Retirement

    Should You File For Bankruptcy?

    Find out how to determine whether this option will help or hurt your financial situation.
  7. Personal Finance

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
  8. Investing

    Fighting Back Against Collection Lawsuits

    There are still options available to those being pursued by a creditor.
  9. Investing

    Buying a House After Bankruptcy? It Is Possible!

    Buying a house after bankruptcy is not impossible. It just takes time to repair your credit score and demonstrate you're a good risk for a mortgage.
  10. Investing

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
RELATED FAQS
  1. What are the full rights of creditors in cases of bankruptcy?

    Learn more about corporate bankruptcy and the rights of creditors. Find out how creditors are repaid in the event of bankruptcy ... Read Answer >>
  2. Can my boss pay off some debts and declare the others in bankruptcy?

  3. What are the differences between chapter 7 and chapter 11 bankruptcy?

    Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past ... Read Answer >>
  4. Can a creditor sue me for a delinquent account?

    Learn what happens when an account is delinquent and read about the regulations that protect consumers who have delinquent ... Read Answer >>
  5. What effect did the Bankruptcy Abuse Prevention and Consumer Protection Act of 2 ...

    Credit card companies and banks hate deadbeats who take from their bottom lines. They especially dislike the Chapter 7 bankruptcy ... Read Answer >>
  6. What debts can I discharge when filing for bankruptcy?

    Discover which types of debt can be discharged through a Chapter 7 or a Chapter 13 bankruptcy and which debts require an ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center