What is the definition of a debtor?

The definition of a debtor is fundamentally tied to the concept of obligation in financial relationships. A debtor is specifically a person or entity that owes money to another party, often as a result of borrowing or a credit agreement. This relationship indicates that they have an obligation to repay that debt under agreed-upon terms.

In a debt arrangement, the debtor is the individual or business that receives funds or goods with the promise to return them or pay for them in the future. This definition helps delineate the role of the debtor in financial transactions, distinguishing them from other roles such as creditors, who are the entities to whom the debt is owed.

Understanding this definition is vital for appreciating broader concepts in finance and law, particularly in the context of loans, credit, and financial responsibility. This distinction is crucial for anyone working in finance or related fields, as it lays the groundwork for understanding personal and corporate finance dynamics.