Sometimes, people aren’t sure if they are in debt, or if they are legally responsible for someone else’s debt. A spouse or a parent, for instance, may feel they are somehow legally responsible for settling the debt of his partner or child. Here is a quick definition of debt and the legal responsibility to repay a debt.
Defining Debt
A good understanding of basic debt terms is necessary when defining debt. A person is in debt when he borrows money from someone and has to repay the amount with interest within an agreed specific time frame – weekly, bi-weekly or monthly. The borrower is called a debtor while the lender a creditor. Debts can come in many forms, including credit card bills, personal loans, mortgages and car loans.
Sometimes, when a debtor fails to make payments as agreed, the creditor may engage the service of a debt collector to collect the debt. The debt collector gets a percentage when the amount is finally recovered or the debt collector buys the debt at a discount from the creditor and keeps the amount collected.
