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Creditor
What does it mean?
A person (or institution) who extends credit by giving a person or organization permission to borrow money if he or she promises to pay it back at a later date. Creditors can be classified into either personal or real. Those who have lent money to friends or family are personal creditors. Real creditors are lenders such as a bank or finance company that have legal contracts with the borrower that grant the lender the right to claim any of the debtor's real assets (e.g. real estate or car) if he or she fails to pay back the loan.
In Other Words...
All too often creditors get bankruptcy notice and they assume they don't have any rights or alternatives to claim what is owed to them by the debtor. However, in such cases, creditors have a couple of options with respect to their claim against the debtor:
1. They can share in any distribution from the bankruptcy estate according to the priority of their claim. Most unsecured, non-wage claims come low on the priority list, in which case the creditor may receive little or nothing.
2. Take the debtor to court and challenge a debtor's discharge (the right not to pay back) due to bankruptcy protection.
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Related Terms
Bank | Bankruptcy | Chapter 11 | Chapter 7 | Credit | Discharge in Bankruptcy | Loan | Mortgage | Unsecured Creditor | Writ of Seizure and Sale
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