Debtor is a person or an organization that owes money to a creditor (person, organization, institution, etc.). The debtor can be denoted in other names like borrower or issuer depending upon the varying situations.

Various Types of Debtors

Following are the situations where a debtor is referred as a ‘Borrower’ and an ‘Issuer’:

  • Borrower: When the debt takes the form of any loan from the financial institutions
  • Issuer: When the debt was taken as bonds

When we take it generally, a debtor will be the customer who is purchasing products or services and hence, owes his/her supplier bucks in return. This makes all the companies as well as people as the debtor on a fundamental level at one time or another. In accounting, a customer-supplier is often referred to as ‘debtor-creditor’.

On the other hand, the term ‘debtor’ is not being used to refer just the customers of products and services but also to anyone who has got loan from a bank or an individual lender. Most generally, each and every debtor will have specific terms with his/her creditor with regards to the payment, discounts and so on.

Debt Relief vs. Bankruptcy

Do you think that your debts got you down? Remember that you are not alone. There are millions and millions of consumer debt cases prevailing all across the globe!

Although you might think that bankruptcy is one of the options for dealing with your financial issues, I would say that it should be considered as the last option. This is because; bankruptcy will have a long-term impact (on a negative aspect) over the creditworthiness of a debtor. Yes, the information of bankruptcy would remain on the debtor’s credit report for a period of ten years. This could hinder the debtor’s ability to obtain:

  • Credit
  • Job
  • Insurance
  • Place to live

Essentials to Consider Before Filing a Bankruptcy

The first and foremost thing you have to do in case you are having problem paying your debts is to have a talk with the creditor. They might be interested to suggest an alternative payment scheme for you. If this doesn’t work out, as a next step, you could contact one of the credit counseling services available in your locality.

The credit counseling services would work with the debtor and creditor in order to come up with the best debt repayment options. The plans like these would require you to secure some money every month with the particular service organization. These organizations would then pay your creditor. There are also some non-profit organizations which would charge little/nothing for the services offered.

You must cautiously consider all the possible options before taking either of the following:

  • Second mortgage
  • Home equity line of credit

Although these loans would allow the debtor to consolidate the debts, they would also require your property as collateral.

Finally, if none of the aforementioned options is possible, then bankruptcy might be the best alternative. Basically, there are two types of bankruptcies: Personal and Corporate. Any debtor must get educated on these before filing for bankruptcy.