Debtor is a word used in economics to describe a person who owes a debt. Whether the debtor borrows money from a friend, relative, lending institution or bank; the person or entity providing the funds is referred to as a creditor.
When a debtor borrows money to obtain a mortgage note, they are generally referred to as a 'Borrower.' In essence, a debtor and borrower are interchangeable terms and always refer to the person who is responsible for repayment of debts.
According to MSN Money, an industry-leader of financial information; Americans currently owe nearly $2 trillion in creditor debts, not including mortgages. This averages out to about $20,000 of debt for every man, woman and child residing in the United States.
With the current financial crisis, creditors are tightening restrictions on lending money. Even if debtors have a strong credit history and repay debts in a timely fashion; credit has become a commodity which is hard to obtain.
Many Americans have become buried in debts they can no longer afford to pay. Unemployment rates have skyrocketed. Subprime lending and overpriced housing has led to a rapid influx of foreclosures. Oftentimes, debtors facing foreclosure file for personal bankruptcy protection.
Although bankruptcy may appear to be a good option, many debtors are unfamiliar with the new bankruptcy laws enacted in 2005. Known as the Bankruptcy Abuse Prevention and Consumer Protection Act; BAPCPA makes it increasingly difficult for a debtor to obtain total discharge of debts.
Instead, debtors are now required to repay a portion of their debts through Chapter 13. This chapter of the U.S. Bankruptcy Code allows debtors to retain their assets (including their home) through the establishment of Chapter 13 payments.
Bankruptcy repayment plans typically place strict financial constraints on debtors. A large percentage of disposable income must be contributed toward repayment of debts. Chapter 13 payments typically extend for three to five years.
In many cases, debtors fail out of bankruptcy within the first year of filing for protection. When this occurs, creditors can petition the court and request dismissal. If this occurs, debtors lose protection from the court and creditors can commence with collection proceedings, including foreclosure.
Debtors facing foreclosure or bankruptcy would benefit from obtaining credit counseling or engaging in bankruptcy alternatives such as debt consolidation or debt settlement.
Our comprehensive Debtor Article Library contains numerous articles regarding money management, how to avoid foreclosure, investing tips, budgeting and more.
If you are struggling to make ends meet and need to quickly sell your real estate, contact Simon Volkov today to determine what options are available. Simon specializes in helping debtors liquidate assets including real estate, business notes, promissory notes and seller carry back trust deeds.