creditor

(noun)

A person to whom a debt is owed.

Related Terms

Examples of creditor in the following topics:

  • Striking Agreements to Avoid Bankruptcy

    • Most creditors are willing to negotiate a settlement to receive a portion of their money and not risk losing everything in a bankruptcy.
    • In general, creditors understand that bankruptcy is an option for debtors with excessive debt.
    • The main cost associated with debt restructuring is the time and effort required to negotiate with creditors.
    • A debtor and creditor could also agree to a debt-for-equity swap, wherein a company's creditors generally agree to cancel some or all of the debt in exchange for equity in the company.
    • By consolidating debts, the debtor replaces payments to many different creditors with a payment to one creditor.

  • What Happens in Bankruptcy

    • Bankruptcy allows debtors to either reorganize and restructure debts or liquidate assets to be used to pay off creditors.
    • The bankruptcy system generally endeavors to reward creditors who continue to extend financing to debtors and discourage creditors from accelerating their debt collection efforts.
    • In involuntary bankruptcy cases, creditors file the petition.
    • A secured creditor may be allowed to take the applicable collateral if the creditor first obtains permission from the court.
    • Interested creditors then vote for a plan.

  • Bankruptcy and Bond Value

    • Under the laws of many countries (including the United States and Canada), bondholders are in line to receive the proceeds of the sale of the assets of a liquidated company ahead of some other creditors.
    • Bank lenders, deposit holders (in the case of a deposit-taking institution such as a bank) and trade creditors may take precedence.
    • When a business is unable to service its debt or pay its creditors, the business or its creditors can file with a federal bankruptcy court for protection under either Chapter 7 or Chapter 11 of the Bankruptcy code.
    • In Chapter 7, the business ceases operations, a trustee sells all of its assets, and then distributes the proceeds to its creditors.

  • Liquidation Preference

    • Property which is held by the company on trust for third parties will not form part of the company's assets available to pay creditors.
    • Before the claims are met, secured creditors are entitled to enforce their claims against the assets of the company to the extent that they are subject to a valid security interest.
    • Security by way of floating charge may be postponed to the preferential creditors.

  • Bankruptcy Considerations

    • Bankruptcy occurs when an entity cannot repay the debts owed to creditors and must take action to regain solvency or liquidate.
    • Bankruptcy is a legal status of an insolvent person or an organization, that is, one who cannot repay the debts they owe to creditors .
    • If potential creditors sense that bankruptcy could be likely firms will have a harder time acquiring financing and even if they do, it will probably come at a high interest rate that significantly increases the cost of debt.

  • Debt

    • A debt is an obligation owed by one party (the debtor) to a second party (the creditor).
    • A debt is an obligation owed by one party (the debtor) to a second party (the creditor).
    • A debt is created when a creditor agrees to lend a sum of assets to a debtor.
    • A debt obligation is considered secured if creditors have recourse to the assets of the company on a proprietary basis or otherwise ahead of general claims against the company.
    • Unsecured debt comprises financial obligations, where creditors do not have recourse to the assets of the borrower to satisfy their claims.

  • Financial Management Before and During Bankruptcy

    • In other words, the debtor should do nothing since a company with no assets or income cannot undergo garnishment by a creditor.
    • In such cases, however, a creditor could attempt to seize.
    • The court may also permit debtors to reject and cancel contracts previously agreed to, if this would be financially favorable to the company and its creditors.
    • In such a case, the company's creditors may be awarded with ownership of the newly reorganized company.

  • Current Ratio

    • Liquidity ratio expresses a company's ability to repay short-term creditors out of its total cash.
    • The current ratio is an indication of a firm's market liquidity and ability to meet creditor's demands.
    • If all other things were equal, a creditor, who is expecting to be paid in the next 12 months, would consider a high current ratio to be better than a low current ratio.

  • The Discount Rate

    • The discount rate represents some cost (or group of costs) to the investor or creditor.
    • Here are some of the most significant costs from the investor/creditor's point of view:
    • If the investor/creditor had the cash s/he could spend it, but since it has been invested/loaned out, s/he incurs the cost of not being able to spend it.

  • Ownership Nature of Stock

    • It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors.