Bankruptcy 101: What is a Debtor?

A debtor is a person or institution who owes money to a creditor. A debtor cannot repay the money owed by the time it is due and files for bankruptcy.

Consumer Debtors

• Consumer debt is an individual, family, or household's debts from personal spending and expenses. Personal credit card debt is an example.
• Individual consumers usually file a Chapter 7 or 13 bankruptcy.
• If a married individual files for bankruptcy, their spouse does not have too. Sometimes, the automatic stay that provides protection from creditors can also apply to the non-filing spouse.
• Once individuals successfully complete their bankruptcy cases, they are usually granted discharges from some or all of their debts. People can choose to file for bankruptcy on their own or with the help of an attorney.

Can Debtors Go to Jail for Unpaid Debts?

• People cannot be sent to jail for unpaid consumer debts like credit cards or medical bills. The Fair Debt Collection Practices Act (FDCPA) stops bill collectors from threatening debtors with jail time.
• But, if someone doesn't pay their taxes or child support, the courts can send them to jail.

What Laws Protect Debtors?

The FDCPA is a law that protects consumers who owe debts. It lays out specific rules for bill collectors, such as when they can call debtors, where they can call them, and how frequently they can make those calls. The law also focuses on protecting the debtor's privacy and making sure their rights are respected. It's important to note that the FDCPA applies primarily to third-party debt collection agencies, which are companies hired to collect debts on behalf of other companies or individuals.

What Can a Creditor Do If a Debtor Doesn't Pay?

When a debtor doesn't pay a debt, creditors have options to collect it.

• If the debt is supported by collateral, like a mortgage or a car loan tied to a house or car, the creditor can try to take back the collateral.
• The creditor might take the debtor to court to request wage garnishment or seek another type of order to ensure repayment. Wage garnishment is the process of collecting a judgment by requiring the debtor's employer to take money out of the debtor's paycheck.