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.
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 in the debt contract. Default may occur if the debtor is either unwilling or unable to pay its
debt. This can occur with all debt obligations including
bonds,
mortgages,
loans, and
promissory notes.
If the debt 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 practiced.
Debtor in Bankruptcy and Individual Voluntary Arrangements
An
Individual Voluntary Arrangement is a legally binding arrangement supervised by a licensed
Insolvency Practitioner, 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
BankruptcyOther uses
In the Latin version of the
Lord's Prayer, 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, which states that Jesus died on the cross as a propitiation, or substitute, for sinners.
See also
