Debtor

Debtor summary:

• A debtor is anyone who owes money to a creditor.

• Debtors are responsible for repaying what’s owed.

• Once you clear a debt, you’re no longer a debtor to that creditor.

Debtor definition and meaning

Debtors owe money to a creditor, which can be another individual, a lender, a company, an organization, or the government. When the money owed is a loan, the debtor may also be called a borrower.  

Key concept: A debtor is someone who owes a debt.

Debtor: a comprehensive breakdown

As soon as you owe someone money, you incur a debt and become a debtor. 

There are many ways to become a debtor. Here are a few examples:

• Sign mortgage paperwork and complete a home purchase

• Buy a plane ticket with a credit card

• Buy a car with a car loan

• Get a personal loan at your credit union

• Go to the hospital and incur a medical bill

• Lose a case in small claims court

• Bounce a check

• Forget to pay a parking ticket

The person, company, organization, or government you owe money to is called a creditor. The law provides debtors and creditors with rights and responsibilities so that we can use the credit system to spend money safely and easily. 

The debtor is responsible for repaying what’s owed. The creditor is responsible for communicating what's owed and for processing payments accurately. 

Debtor examples

Laura became a debtor when she used an auto loan from her credit union to buy a car. She signed papers agreeing to the terms of the loan, including its interest rate, years to repay, and monthly payments. She's chosen to go paperless, and accesses her account online to check her last payment, current loan balance, and other information. When she pays off her loan, the lender will give her the clear title to her car.

Jim became a debtor when he had a medical emergency and ended up in the hospital. Fortunately, he recovered and was discharged after a week. Jim’s health insurance didn’t cover his expenses entirely. He now owes about $16,000 in medical debt, which includes his deductible and coinsurance fees. He spoke to their accounting office, and they worked with him to set up a schedule of payments that he could afford. 

Natalie became a debtor when she bounced a check to Luna's Pizza on Friday night—but only for a couple of days. When the restaurant owner called her on Monday, Natalie drove to Luna's, paid in cash, and apologized. As soon as you pay off your debt, you're no longer a debtor.

The information provided in this article is intended for general informational purposes only and should not be taken as legal advice. For personalized legal advice, consult with a qualified attorney licensed to practice law in your state.