What is a debtor

In financial terminology, a «debtor» refers to an entity or individual who owes funds to another party, known as a creditor. If your business makes a sale, then you become the creditor, and the purchaser is designated as the debtor.

A debtor is a person who has borrowed money or has received goods or services with the promise to pay later, such as with a credit card or through invoicing. This individual has committed to repaying the owed amount.

What are some examples of a debtor?

Should an entity or individual procure an item with payment deferred through invoicing, that party assumes the role of the debtor until the outstanding amount has been paid. Debtors can span a diverse spectrum of entities, ranging from companies and organisations to private individuals.

If a debtor fails to make their payments, the creditor is entitled to employ debt collection methods or send payment reminders to recover the owed money. If the debt remains unpaid, the creditor may resort to legal actions, such as initiating bankruptcy proceedings or arranging for the forced sale of the debtor’s assets.