Debtor

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What is a 'Debtor'

A debtor is 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.

BREAKING DOWN '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 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.

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