Creditor

We explain what a creditor is, what types exist and how it differs from a debtor. In addition, we tell you what a credit balance is.

What is a creditor?

a creditor It is a natural or legal person with whom someone owes a debt. That is, it is an entity empowered to demand payment of a debt or compliance with an obligation, regardless of whether the debtor party has the resources to satisfy this demand. It can also be called “creditor party” in contracts and legal and financial documents.

The term “creditor” is formed by Latin roots ad- (“towards”) and believe (“believe” or “lend”), so in its origins it refers to the party that lends money or that trusts the other to fulfill an agreement. The creditors, thus, are the party that waits for the debtor to comply with what was agreed or that the law requires you to do so. In many cases, when the debt or obligation can no longer be honored, the creditor may demand compensation (for lost profits, or for damages).

In a figurative sense, this word can be synonymous with “deserving” or “recipient.” in cases like “being a creditor of his rage” (that is, deserving someone's rage). The following terms can be synonymous with creditor: guarantor, plaintiff, applicant, claimant.

See also: Financing

Difference between creditor and debtor

He creditor and the debtor They are the two extremes of a legal obligation, that is, the creditor is the party that demands compliance with the obligation (such as the payment of money, for example, or the performance of a job) and is the active subject of the relationship. ; while The debtor is the party obliged to comply with the agreement and is the passive subject of the relationship.

In both cases, they may be natural or legal persons, subject to the particular law that regulates this type of legal relationship. Furthermore, they are complementary figures: a creditor cannot exist without a debtor, and vice versa.

Types of creditors

It is possible to distinguish between two types of creditors, depending on the nature of the agreement that links them with their respective debtor or debtors:

• Real creditors. Those that have legal or legal support to claim compliance with what was agreed, such as a contract or some document valid under the law.
• Personal creditors. Those who do not have legal or legal support to attest to the agreement made, since it was made orally or in informal terms.

Once this difference is established, other ways of classifying creditors can be considered, taking into account the type of obligation that links them to the debtor:

• Privileged creditors. They are those who have some type of priority granted by law for the collection of their obligations, above other types of creditors. This situation derives from what is contemplated in the law for certain exceptional rights. An example of this type of creditor is the worker who demands payment from the company of his salary owed after the termination of the employment contract.
• Pledged or pledged creditors. They are those who have received a luxury good, such as jewelry or expensive clothing, as collateral for compliance with the obligation. Thus, if the agreement is not fulfilled, the assets become the property of the creditor. An example of this type of creditors are pawn shops, where a person can request a loan in exchange for leaving an asset of equivalent or greater value as a guarantee of return of the money.
• Mortgage creditors. They are those who claim compliance with a mortgage, that is, a loan granted under the guarantee of some real estate property, such as a house or an apartment. Thus, in the event that the debt is not settled, the creditor can demand delivery of the mortgaged property. An example of this type of creditor is banks and other mortgage lending entities.
• Unsecured creditors. They are those who did not receive any guarantee of compliance with the debt or obligation, but who have a promissory note or other type of document that commits the debtor in writing to honor the debt incurred. They are also known as common or simple creditors. In case of non-compliance with the obligation, the creditor can go to court with this document and initiate legal action against the debtor. An example of this type of creditor is those contracting a service or a job.
• Hereditary or succession creditors. They are those who claim the delivery of an asset or the payment of money as part of an inheritance received, that is, as part of an inheritance procedure. An example of this type of creditor is the children of an elderly person who dies and receive ownership of their assets.
• Refurbishment creditors. They are those who claim the return of money invested in the repair, reconditioning or remodeling of another's property. An example of this type of creditor is investors in remodeling work on an office building that is then sold on the real estate market.

Credit balance

In accounting, it is called credit balance to the surplus of income after deducting expenses. In other words, we can speak of a credit balance when money income exceeds expenses, that is, when after honoring obligations (liabilities) there is a positive or favorable balance.

The credit balance It is the opposite of the debit balance, which occurs when expenses exceed income. It is also possible to speak of a zero balance, when expenses and income are completely offset and yield a result equal to or close to zero.

Continue with: Tenant

References

• “Creditor” in Wikipedia.
• “Creditor, ra” in the Pan-Hispanic Dictionary of Legal Spanish of the Royal Spanish Academy.
• “Radication of the word Creditor” in the Online Spanish Etymological Dictionary.