It is an entity that owes money to another entity. The entity can be a firm, an individual, a company or a government. It has an obligation for repaying the debt, through the process which is governed by written agreements. The counter party is known as creditor. When the counter party is a bank, it is referred as a borrower. The relationship of debtor-creditor is complementary to the supplier and customer relationship.
Different kinds of debtors
It is not only a customer of goods and services, but also a borrower of money from a bank or a lender.
For example- After you find a good house in a fine locality, you decide to go for a Home loan through a bank. Once you take home loan from bank then you as the homeowner is a debtor. While the bank who gave you home loan is the creditor.
Different types of debts :
- Bank debts
- Trade debts
- Loan debts
- Overdraft debts
- Phone debts
- Utility debts
Default
Default occurs when the debtor has not met its legal obligations according to the debt contract. For example- it has not made a scheduled payment, or has violated the debt contract. Default can occur when the entity is unwilling or unable to pay its debt.
