Accounting terms

Dictionary of all accounting terms

What is a Debtor?

A debtor is an person, company or organization who owes money.

Debtors are usually people, organizations or companies that have borrowed money in some form. If someone took a loan from a financial institution, the debtor is normally referred to as a borrower. If the debt is for securities, such as bonds or stocks, debtor is normally referred to as an issuer.

In legal terms, anyone who voluntarily declares bankruptcy is also known as a debtor.

Debtors owe money to creditors, and therefore it it similar to the customer-supplier relationship.

In very general terms, a debtor is anyone who owes money to a creditor. Therefore, if you send out an invoice to your customer, after having delivered the goods or services, that customer is now a debtor and you are the creditor.

It is not illegal to have debt, and there are many agreements between the creditor and debtor for repayment.

Beyond that, according to many debt may be a good thing if it is in the form of an investment. Good debt therefore would be college loans or mortgages. Bad debts are usually considered as things that lose their value quickly or have high interest rates, such as purchasing shoes or taking on credit card debt.

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