Creditor Definition: Understanding the Role of Creditors
Most modern credit is extended through specialized financial institutions, of which commercial banks are the oldest and most important. In present-day industrial economies, the banks are able to extend and increase the supply of credit by the creation of new deposits for their loan customers. Creditors take a risk when extending credit. If a borrower defaults or a debt can’t be repaid, the creditor may have to hire a collection agency or file a costly lawsuit. Often, these strategies are more expensive than the original debt.
Having a general definition can hopefully help you cut through some of the jargon to better understand some of the financial advice that comes with applying for credit. Section 102(b) of Pub. 97–25 provided that the amendment made by that section is effective Apr. 10, 1982.
If you’re the person who owes the money to a creditor, you may be referred to as a debtor or borrower. There are some exceptions to this rule. A line of credit refers to a loan from a bank or other financial institution that makes a certain amount of credit available to the borrower for them to draw on as needed, rather than taking all at once.
This means that the company does not pay for the goods delivered or services rendered immediately, but incurs a liability to the creditor which is settled at a later date. Creditors are therefore also referred to as creditors in accounting, as they are entitled to payment from the company. These liabilities are shown on the company’s balance sheet as current or non-current liabilities, depending on the agreed payment term.
2010—Pub. 111–203, § 1100A(2), which directed substitution of “Bureau” for “Board” wherever appearing, was executed by making the substitution wherever appearing in subsecs. (g), (z), and (bb)(2)(A), (C), (4)(D), but not in subsec. (c), to reflect the probable intent of Congress.
All ongoing correspondence of an IVA must first go through the appointed Insolvency Practitioner. The creditors will begin to deal with the Insolvency Practitioner and readily accept annual reports when submitted. Creditors play an important role in the economy, helping people purchase items they otherwise may not be able to afford, such as a house, a car or school tuition.
These exemptions include sums of money, life insurance, and parcels of land. Lenders are also concerned with the risk of default. Many times they first look at the ability a company has to pay obligations and then focus on the probability that the company will not pay its obligations. These creditors are critical to a company’s business operations as they provide the necessary resources and services required for production, distribution and operations. The efficient management of creditors is therefore essential to ensure financial stability and continuity in business operations. Today, a creditor can be anything from a global bank to a relative.
A creditor without a lien (or other legal claim) on the company’s assets is an unsecured creditor. Generally, creditors can be divided between those who “perfected” their interest by establishing an appropriate public record of the debt and any property claimed as collateral for it, creditor definition and those who have not. Creditors may also be classed according to whether they are “in possession” of the collateral, and by whether the debt was created as a purchase money security interest.
Treasuries, for example, are backed by “full faith and credit of the United States.” You post debtors on the debit side of the debtor accounts and creditors on the credit side of the creditor accounts. Debtors are customers or business partners who have received goods or services and still owe a payment to the company. The business relationship between a creditor and a debtor entails various risks for the creditor, particularly with regard to the debtor’s ability and willingness to pay. Various hedging measures can be taken to minimize these risks. This table provides a compact overview of the potential risks to which a creditor may be exposed and the corresponding measures to hedge against these risks.
96–221, § 603(b), redesignated former subsecs. (s) and (t) as (x) and (y), respectively. 1981—Subsecs.
The term passed into Old French as “crediteur” before making its way into Middle English. If the creditor is a vendor or supplier that did not require the company to sign a promissory note, the amount owed is likely to to be reported as Accounts Payable or Accrued Liabilities. The purchase price, which would be used to pay creditors including general contractor Lendlease and EB-5 visa investors, would just be the beginning of expenses for the new owner.
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