A creditor refers to a party, which may be a person, company, organization or government to whom a specific amount of money/cash is owed. The creditor has offered certain service or property to another party assuming that the latter will return the service or property of equal value. The other party which owes money to the creditor is called a borrower or debtor.
In financial terms, the word creditor is often used with regard to short term loans, mortgages and long term bonds. The term has been derived from the concept of credit. Credit is the rating or score which is indicative of whether the borrower is likely to repay the loan or not.
In accounting, creditors are fragmented into amounts which fall due within a year or amounts that fall due after a year. Financial statements present long-term liabilities, long term creditors, current liabilities and current creditors.
“Creditor’s rights” refers to a legal term that is used for describing a series of procedural rules aimed for protection of the creditors’ ability for collecting the money from those persons who are owed. The provisions usually vary in every jurisdiction but generally it gives right to the creditor for putting a lien on the debtor’s property, to bring about a seizure as well as forced sale of the property of the debtor and to prevent fraudulent property transfer by a debtor in a bid to prevent it from being seized. A particular creditor’s rights partly depend on the purpose of the debt and the terms written down on the loan agreement.
Usually creditors are classified based on those who have established a suitable public record relating to the debt and over the property which is taken as its collateral, and those creditors who are not successful in doing so. Creditors can also be grouped based on whether they have the collateral in their possession or whether that debt had been created on account of buying money security interest. Security interest refers to the property interest developed by law or an agreement over assets in order to secure a debt payment.
Attorneys or specialized lawyers dealing with creditor’s rights deal with these:
• Filing lawsuits or making use of several other legal techniques for collection of consumer debts.
• Filing of lawsuits or using other types of legal techniques for collection of commercial debts (business debts).
• Representing a creditor in a proceeding relating to bankruptcy
• In case of a purchaser defaulting on payments, a creditor’s attorney brings about foreclosure of homes as well as commercial real estate.
• Attorneys also work for recovery, also called replevin of collateral or secured goods like automobiles, in case of a purchaser making defaults on his payments.
Creditor’s rights are not only concerned with their rights against debtors, but also deal with creditors rights against each other. In case of a situation where several creditors are claiming a right against a particular debtor’s accounts, the rules formulated for creditors rights provide guidance to which creditor should enjoy the strongest right over any relief.