Who is a creditor? This can be a person or an organization that is having a claim over the services of the debtor. In other words, the creditor is the person to whom fund is owed. This is in contrast to a debtor, who is a person or organization who owes fund to the creditor. In simple terms, the relationship between these two persons or organizations is complimentary to the relationship between a customer and a supplier.

More generally, the creditor will be a supplier who supplies a product/service as his/her business. Theoretically, this would mean that every retailer is a creditor as they are selling a product/service. However, usage of this term is done only for accounting where there will be a long-term relationship between the customer and supplier.

Are You a Creditor?

Are you willing to know if you are a creditor? Yes, you are if a person or organization owes you funds. Most typically, you are owed money as you have provided the person or organization with products/services or have made loans.

Worker owed money for his/her unpaid salary will also be called as a creditor. And, if you are owed money by your organization when certain events occur, you can be called as a creditor in this case too. In this case, you are sometimes called as ‘contingent creditor’.

Secured Vs. Unsecured Creditor

You are a secured creditor if you have a charge on the assets of a debtor for the purpose of securing the debt that is owed by him/her. All the creditors would usually need a charge on the debtors’ assets while providing a loan. On the other hand, if you do not have a charge on the assets of the debtor, they you are an unsecured creditor.

What Is Your Right As A Creditor in Bankruptcy?

More often, a creditor would receive a bankruptcy notice and you may assume that the creditor does not have any right or alternative with regards to his/her claims against the particular debtor. This is not fully correct. In bankruptcy, a creditor is entitled to the following:

  • A share in any of the distributions from the particular bankruptcy property as per the priority of your claim. Remember that, in the priority scheme, the unsecured claims would come low. In this case, you might get little/nothing.
  • Be listened by the court in subjects pertaining to the:
    • Plans of your debtor
    • Liquidation of your debtor’s assets
    • Settlements from the assets of the property
  • Summon the debtor’s right to discharge your debt

What You Should Do As A Creditor

If you are wondering on what you should as a creditor in case of bankruptcy, follow the below guidelines:

  • Stop all of the debtor’s collection actions
  • File your claim with court
  • Determine whether your claim is a dischargeable one
  • Determine whether the claim is being secured by the assets of your debtor
  • Share all the information to your trustee
  • Closely follow the development of your case

Remember that, bankruptcy is being governed by the Federal Statute and this is superseding the ‘debtor-creditor’ law.