A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some
property Property is a system of rights that gives people legal control of valuable things, and also refers to the valuable things themselves. Depending on the nature of the property, an owner of property may have the right to consume, alter, share, ...
or service to the second party under the assumption (usually enforced by
contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to ...
) that the second party will return an equivalent property and service. The second party is frequently called a debtor or borrower. The first party is called the creditor, which is the lender of property, service, or money. Creditors can be broadly divided into two categories: secured and unsecured. *A secured creditor has a security or charge over some or all of the debtor's assets, to provide reassurance (thus to ''secure'' him) of ultimate repayment of the debt owed to him. This could be by way of, for example, a mortgage, where the property represents the security. *An unsecured creditor does not have a charge over the debtor's assets. The term creditor is frequently used in the financial world, especially in reference to short-term loans, long-term bonds, and mortgage loans. In law, a person who has a money judgment entered in their favor by a court is called a ''judgment creditor''. The term creditor derives from the notion of credit. Also, in modern America, credit refers to a rating which indicates the likelihood a borrower will pay back their loan. In earlier times, credit also referred to reputation or trustworthiness.

Accounting classification

accounting Accounting, also known as accountancy, is the measurement Measurement is the quantification of attributes of an object or event, which can be used to compare with other objects or events. In other words, measurement is a process of d ...
presentation, creditors are to be broken down into 'amounts falling due within one year' or 'amounts falling due after more than one year'... The
financial statements Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...
presentation is this: * Long-term liabilities **'Long-term creditors' * Current liabilities **'Current creditors'


Creditors' rights are the procedural provisions designed to protect the ability of creditors—persons who are owed money—to collect the money that they are owed. These provisions vary from one
jurisdiction Jurisdiction (from Latin 'law' + 'declaration') is the legal term for the legal authority granted to a legal entity to enact justice. In federations like the United States, areas of jurisdiction apply to local, state, and federal levels. J ...
to another, and may include the ability of a creditor to put a lien on a debtor's property, to effect a seizure and forced sale of the debtor's property, to effect a garnishment of the debtor's wages, and to have certain purchases or gifts made by the debtor set aside as fraudulent conveyances. The rights of a particular creditor usually depend in part on the reason for which the debt is owed, and the terms of any writing memorializing the debt.

Priority of creditors

Creditors' rights deal not only with the rights of creditors against the debtor, but also with the rights of creditors against one another. Where multiple creditors claim a right to levy against a particular piece of property, or against the debtor's accounts in general, the rules governing creditors' rights determine which creditor has the strongest right to any particular relief. 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, 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. A creditor may generally ask a court to set aside a fraudulent conveyance designed to move the debtor's property or funds out of their reach.

Specialized legal practices

lawyer A lawyer is a person who Practice of law, practices law. The role of a lawyer varies greatly across different Jurisdiction, legal jurisdictions. A lawyer can be classified as an advocate, attorney at law, attorney, barrister, canonist, canon l ...
s have a specialized practice area focused on the collection of such
debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...
s. Such attorneys are frequently referred to as collection attorneys or collection lawyers. Attorneys who practice in the area of "creditor's rights" perform one or all of the following: *File lawsuits and using other legal collection techniques to collect
consumer A consumer is a person or a group who intends to order, or uses purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. ...
debts (i.e., debts owed by individuals) *File lawsuits and using other legal collection techniques to collect commercial debts (i.e. debts owed by businesses) *Represent creditor's interests in a
bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order A court order is an offici ...
proceeding * Foreclose on homes or commercial real estate if the purchaser defaults on payment *Recover (or replevin) secured goods (e.g., automobiles) if the purchaser defaults on payment

Creditor's power during insolvency

In the UK, once an Individual Voluntary Arrangement (IVA) has been applied for, and is in place through the courts, creditors are prevented from making direct contact under the terms of the IVA. 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. Under the
Companies Act 2006 The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom The Parliament of the United Kingdom is the supreme legislative body of the United Kingdom The United Kingdom of Great Britain and Northern Ireland ...
, a company's creditors may apply to the court for an order summoning a meeting of the creditors or some of the creditors who fall into a specific category, in order to consider a compromise or "arrangement" between the company and its creditors. If a majority representing 75% in value of the creditors or class of creditors present and voting either in person or by proxy at the meeting agree a compromise, the meeting may apply to the court for the compromise to be enforced. The same provision would apply to members (
shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership A partnership is an arrangement where parties ...
s) of a company seeking to make an arrangement with the company. The Corporate Insolvency and Governance Act 2020 makes similar provision where a compromise has been proposed between creditors or members and a company which "has encountered, or is likely to encounter, financial difficulties".UK Legislation
Corporate Insolvency and Governance Act 2020, Schedule 9: Arrangements and Reconstructions for Companies in Financial Difficulty
accessed 15 August 2020

See also

* Accounts payable * Accounts receivable * Accruals and deferred income * Bank loan and overdraft * Bankruptcy law *
Bill of exchange A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a ...
payable * Collection agency *
Contract law A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to ...
* Contribution claim (legal) * Creditor's rights * Debenture loans * Debtor *
Dividend A dividend is a distribution of profits by a corporation to its shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body po ...
s * Fair Debt Collection Practices Act * Individual voluntary arrangement * IOU (I Owe You) *
Payment A payment is the voluntary tender of money or its equivalent or of things of value by one party (such as a person or company) to another in exchange for goods, or services provided by them, or to fulfill a legal obligation. The party making t ...
s received on account


{{Authority control Credit Debt