Voluntary debtor and creditor relationship is a relationship that exists between two persons from voluntary interactions in which one, the debtor, can willingly be compelled to provide services, money, or goods to the other, the creditor.

This sort of debtor – creditor relationship consists of both rights and duties. “Rights” describe what is owed to the creditor, such as the right to repayment of a loan or the right of a landlord to enter property if the rent is not paid. “Duties” emphasize the required actions of the debtor, such as the duty to pay taxes or to repay loans.

Those roles can also be expanded under some state and federal statutes. For instance, under federal law, a creditor has the right to collect on a debt, but has the duty to report accurate information to credit reporting agencies. In the same vein, a debtor has the duty to repay a debt, but has the right to live free from telephone harassment in the collection efforts for that debt.

Note that there are so many federal and state laws that deal with the rights and obligations of debtors and creditors. These laws tend to go back virtually to the beginning of money and trade, but modern laws have become concerned with consumer protection. They touch other areas of the law as well, such as taxation and landlord – tenant law.

In this present age, we can all agree that the world’s economy is dependent on billions of debtor – creditor relationships. At every level, goods and services are provided in exchange for a promise, explicit or implicit, to pay for those goods and services.

In addition, almost every individual and business in America either owes money or is owed money, or both. Have it in mind that it is these debtor – creditor relationships that make it imperative to protect assets from creditors who would seize them to satisfy debts. However, most of our debtor – creditor relationships arise from voluntary interactions.

Few Examples of Voluntary Debtor Creditor Relationship

Just like it was stated above, most of the creditor relations with debtors emerge from the voluntary interactions including all types of loans, use of credit cards and credit lines. Here are very few examples to consider.

  1. When a person acquires a car and finances the cost, the purchaser is voluntarily incurring debt.
  2. When a credit card is used to purchase goods or services; the purchaser is voluntarily creating a debt to the credit card company by using the card to make the purchase.
  3. When a person goes into a restaurant and orders dinner, a debt is initiated since the food is prepared and served by the restaurant in exchange for the diner’s implicit promise to pay for it. Although this debt is paid immediately, it is still a voluntary debtor and Creditor Relationship.
  4. When a consumer enters into a loan. The consumer then becomes the debtor and the lending institution is the creditor.

4 Key Factors in a Debtor Creditor Relationship

Voluntary creditor – debtor relationships of many kinds develop between businesses, just as they extend between individuals. Even companies can and do sometimes reach out to other companies with courtesies, gratitude, obligations, respect, and assistance of many kinds.

There are important factors to consider in every formal creditor – debtor relationship and all these are expected to be included in a legally binding agreement (or contract). These contracts or agreements more or less always include an unambiguous and detailed description of the following:

1. Time span of the Relationship

For instance, a loan contract is always expected to state the time span over which the specific creditor – debtor relationship should exist. With bank loans, this tends to include a payment schedule with specific calendar dates. Also, credit card plans specify payment timing requirements. Bond investors are known to receive a statement with their purchase with the issuer’s commitment to interest payments and the bond’s maturity date.

2. Contract Flexibility

Every contractor agreement is meant to describe legal changes, if any that can be made to the time frame or payment terms during the life of the relationship. Note that these changes might include, for instance, a clause allowing the debtor to make an early payoff. In addition, allowable changes may include the creditor’s right to recall (revoke or take back) the loan before the end of its planned life.

3. Rights and Responsibilities

Also note that contract is expected to state certain rights and responsibilities of both debtor and creditor, explicitly, extensively, and in complete detail. Also both parties affirm agreement to these terms with hand – written signatures on paper, and these may or may not require signed witness by a responsible third party, such as a Notary Public. Some contracts instead call for affirmation or agreement by electronic signature.

In terms of a secured loan, the creditor more or less has some claim to the loan collateral or other of the debtor’s assets, if the debtor fails to repay the loan as agreed. Businesses or individuals who buy bonds, for instance, are voluntarily lending money to the issuing organization and become its creditors.

If a bond – issuing company shuts down and liquidates, the company is expected to pay the claims of bond holding creditors before it pays preferred share stock owners. In liquidation, owners of common stock shares have the lowest payment priority. Howbeit, common stock shareholders are paid only if liquidation funds remain after paying higher priority creditors.

4. Remedies and Solutions

In principle, debt contracts state, clearly, solutions available to both parties should one or the other party fail to meet the terms of the agreement. However, in reality, these statements deal almost exclusively with remedies available to the creditor should the debtor fail to meet payment terms.

Normally, when customers fail to pay on time or otherwise fail to meet payment agreements, the creditor bank or merchant still tries for a period to persuade the customer to pay. In this agreement or contract, creditors specify in advance the number of days they can let these attempts continue, for example, 30, 60 or 120 days. If the customer does pay during that time, the creditor may or may not add a “late charge.”


The relationship between a creditor and a debtor is vital to understand in order to achieve operational excellence. However, if you need more insight on how to manage positive creditor relations or you are seeking an effective medium to communicate the information in a sensible manner, talking to an attorney or reputed consultancies that deal in business and investor relations would be in your best interest.