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Debtor-creditor law is a body of legal statutes that govern the relationship between debtors, those who borrow money or make purchases on credit, and creditors, those who loan money or provide lines of credit. Each country has its own federal or national debtor-creditor laws, with some countries passing responsibility for creating specific statutes on to state or municipal legislative bodies. Some countries, such as the United States, have debtor-creditor laws to govern all debt-related transactions up to the point of insolvency, at which point, bankruptcy laws pick up where debtor-creditor laws leave off. Other countries may include insolvency, bankruptcy, or debt charge off proceedings within the parameters of debtor-creditor law.
Federal, state, and local statutes embodied in debtor-creditor law outline both debtor's rights and creditor's rights as they relate to offering and accepting credit, repayment terms, and what happens if a debtor is unable to repay. Laws governing debts and debt collection are enacted to protect the rights and liberties of both parties, not just debtors or just creditors. To illustrate, legal responsibility regarding paying back a debt is covered under most statutes classified under debtor-creditor law. Likewise, limitations on a creditor's ability and permissible methods for debt collection are also covered. Concerning countries with bankruptcy or insolvency statutes included within debtor-creditor law, further statutes regulate when and how a debtor can apply for or be forced into official insolvency proceedings.
Examples of statutes involved in debtor-creditor law include disclosing terms to potential debtors, giving proper notice of changes such as interest rates, and abiding by repayment agreements. For example, creditors in countries such as the United States and Great Britain, under debtor-creditor law, are required to give debtors all necessary information regarding the terms of loans and other forms of credit. Additional laws protect consumers from having property seized for payment of unsecured loans as well as limiting the days and times creditors may call to pursue debt collection.
Creditors are also protected under debtor-creditor law. Should a debtor be unwilling or unable to abide by the terms of a credit agreement, creditors have specific remedies to help recoup bad debts. In the event a debtor defaults on the terms of a repayment agreement, the debtor-creditor law in certain countries provides creditors with the ability to write off bad debts as a tax deductible business expense. Fraud, deliberately hiding assets, and other unscrupulous ways to avoid repaying debt are similarly covered under debt laws to further protect the rights of creditors.