A debt creditor is a person or entity money is owed to. The debt creditor can be anyone: an individual, a business or organization, or even a governmental department. Products or services are provided to the second party, the debtor, with the expectation of payment being remitted for services rendered.
Payments from the debtor are expected be made based on an agreement with the debt creditor, and may or may not include interest. These terms should be agreed to between both the debtor and creditor before any exchange of money or service occurs. Most of the time, payment is in the form of currency, but in certain situations, payment in goods is acceptable.
Generally, debt creditors are paid the money they are due without issue, but at times, debtors are unable to meet their payment obligations. A debt creditor may then seek third party assistance from collection agencies to get his or her funds. This usually happens after several attempts to collect the debt go unanswered. To avoid collection issues, debtors should stay in touch with creditors and keep them apprised of any situation that may prevent meeting the agreement to make adjustments as necessary. Debts may be reported unpaid to the credit bureaus, posing issues for debtors when trying to get other companies to extend credit to them for any reason.
A third party collection agency buys the debt from the creditor, and seeks the payment from the debtor in order to make their money back. In some cases, these third party collection agencies can be very aggressive when trying to collect their funds. They may also offer debt settlement options, however, so debtors are able to erase the debt from their records.
A debt creditor has a few different options for restitution. In the case of vehicle and home loans, the creditor may choose to repossess the property. In other cases, legal actions, such as suing the debtors for money owed, may be taken.
Debtors who cannot meet their financial obligations have a few options as well. Debt settlement companies work as a third party to assist the debtor in reducing the overall amount due, either by eliminating late fees or reducing interest rates. Consumer credit counseling organizations work to help people determine a budget and learn how to monitor spending habits to avoid debt issues. If a debtor's credit is still in good standing, a debt consolidation loan may be a viable option to combine all the debt into one monthly payment. Even though bankruptcy is an option, it should usually be used only as a last resort, as it can cause issues for a debtor for many years after.