Debtor-Creditor Relationships Can Be Voluntary or Involuntary The world's economy is dependent on billions of debtor-creditor relationships. Non Payment is Not a Criminal Offense. If all else fails, an attorney may be called upon to commence a formal process of debt collection.
The same is true when a credit card is used to purchase goods or services; the purchaser is voluntarily creating a debt to the credit card company by using the card to make the purchase. An unsecured creditor can become a secured creditor by gaining a lien against the debtor's property.
For example, if Alpha Company lends money to Charlie Company, Alpha takes on the role of the creditor, and Charlie is the debtor.
Replevin allows creditors to seize items, such as security interests in which they have an interest in to satisfy debts. The Federal Consumer Credit Protection Act as well as state and federal statute limit the kinds of properties that can be used for debt satisfaction.
The critical issues in such cases are the debtor's will and the debtor's actual ability to pay. And, when real estate properties serve as collateral, the creditor "forecloses" the loan. The law provides for a creditor to fall into one of two categories.
This is because most business transactions result in some form of debt for a given party, and even individuals outside of business practices are often debtors, whether to a credit card company or to a bank. A debtor is an entity or person that owes money to another party.
The same write-off also appears on the creditor's Income statement as an expense.