The Legal Lexicographer Bouvier defines credit & debt as:

CREDIT, common law, contracts.

1. The ability to borrow, on the opinion conceived by the lender that he will be repaid. This definition includes the effect and the immediate cause of credit. The debt due in consequence of such a contract is also called a credit; as, administrator of an the goods, chattels, effects and credits, &c.
2. The time extended for the payment of goods sold, is also called a credit; as, the goods were sold at six months credit.
   
3. In commercial law, credit is understood as opposed to debit; credit is what is due to a merchant, debit, what is due by him
4. According to M. Duvergier, credit also signifies that influence acquired by intrigue connected with certain social positions. 20 Toull. n. 19. This last species of credit is not, of such value as to be the object of commerce. Vide generally, 5 Taunt. R. 338.
   

CREDITOR, persons, contracts.

1. A creditor is he who has a right to require the fulfilment of an obligation. or contract.
2. Creditors may; be divided into personal and real.
3. The former are so called, because their claims are mainly against the person, who can reach the property of their debtors only by; virtue ofthe general rule by which he who has become personally obligated, is bound to fulfill his engagements, with all his property acquired and to be acquired, Which is a common guaranty for all his creditors.
4. The latter are called real, because they have mortgages or other securities binding on the real estates of their debtors.
5. It is proper to state that personal creditors may be divided into two classes first, those who have a right on all the property of their debtors, without considering the origin, or the nature of their claims; secondly, those who, in consequence of some provision of law, are entitled to some special prerogative, either in the manner of recovery, or in the rank they are to hold among creditors; these are entitled to preference. As an example, may be mentioned the case of the United State; when they are creditors, they have always a preference in case of insolvent estates.
6. A creditor sometimes becomes so, unknown to his debtor, as is the case when the former receives an assignment of commercial; paper, the title to recover which may be conveyed either by endorsement, or, in some cases, by mere delivery. But in general it is essential there should be a privity of contract between the parties. Vide, generally, 7 Vin. Ab. 42; 3 Com. Dig. 343; 8 Com. Dig. 388; 1 Supp. to Ves. Jr. 302 2 Sup. to Ves. Jr. 305 Code, 7, 72, 6; Id. 8, 18; Dig 42, 6, 17; Nov. 97 ch. t3 Bouv. Inst. Index, h.t.

DEBT, contracts.

1. A sum of money due by certain and express agreement. 3 Bl. Com. 154. In a less technical sense, as in the "act to regulate arbitrations and proceedings in courts of justice" of Pennsylvania, passed the 21st of March, 1806, s. 5, it means an claim for money. In a still more enlarged sense, it denotes any kind of a just demand; as, the debts of a bankrupt. 4 S. & R. 506.
2. Debts arise or are proved by matter of record, as judgment debts; by bonds or specialties; and by simple contracts, where the quantity is fixed and specific, and does not depend upon any future valuation to settle it. 3 Bl. Com. 154; 2 Hill. R. 220.
3. According to the civilians, debts are divided into active and passive. By the former is meant what is due to us, by the latter, what we owe. By liquid debt, they understand one, the payment of which may be immediately enforced, and not one which is due at a future time, or is subject to a condition; by hypothecary debt is meant, one which is a lien over an estate and a doubtful debt, is one the payment of which is uncertain. Clef des Lois Rom. h.t.
4. Debts are discharged in various ways, but principally by payment. See Accord and Satisfaction; Bankruptcy; Confusion Compensation; Delegation; Defeasance; Discharge of a contract; Extinction; Extinguishment; Former recovery; Lapse of time; Novation; Payment; Release; Rescission; Set off.
5. In payment of debts, some are to be paid before others, in cases of insolvent estates first, in consequence of the character of the creditor, as debts due to the United States are generally to be first paid; and secondly, in consequence of the nature of the debt, as funeral expenses and servants' wages, which are generally paid in preference to other debts. See Preference; Privilege; Priority.

DEBT, remedies.

The name of an action used for the recovery of a debt eo nomine and in numero though damages are generally awarded for the detention of the debt; these are, however, in most instances, merely nominal. 1 H. Bl. 550; Bull. N. P. 167 Cowp. 588.

The subject will be considered with reference, 1. To the kind of claim or obligation on which this action may be maintained. 2. The form of the declaration. 3. The plea. 4. The judgment.

Debt is a more extensive remedy for the recovery of money than assumpsit or covenant, for it lies to recover money due upon legal liabilities, as, for money lent, paid, had and received, due on an account stated; Com. Dig. Dett, A; for work and labor, or for the price of goods, and a quantum valebant thereon; Com. Dig. Dett, B Holt, 206; or upon simple contracts, express or implied, whether verbal or written, or upon contracts under seal, or of record, or by a common informer, whenever the demand for a sum is certain, or is capable of being reduced to certainty. Bull. N. P. 167. It also lies to recover money due on, any specialty or contract under seal to pay money. Str. 1089; Com. Dig. Dett, A 4; 1 T. R. 40. This action lies on a record, or upon a judgment of a court of record; Gilb. Debt, 891; Salk. 109; 17 S. & R. 1; or upon a foreign judgment. 3 Shepl. 167; 3 Brev. 395. Debt is a frequent remedy on statutes, either at the suit of the party grieved, or of a common informer. Com. Dig. Action on Statute, E; Bac. Ab. Debt, A. See, generally, Bouv. Inst. Index, h.t.; Com. Dig. h.t.; Dane's Ab. h.t.. Vin. Ab. h.t.; Chit. Pl. 100 to 109; Selw. N. P. 553 to 682; Leigh's N. P. Index, h.t. Debt also lies, in the detinet, for goods; which action differs from detinue, because it is not essential in this action, as in detinue, that the property in any specific goods should be vested in the plaintiff, at the time the action is brought; Dy. 24 b; and debt in the debet and detinet may be maintained on an instrument by which the defendant is bound to pay a sum of money lent, which might have been discharged, on or before the day of payment, in articles of merchandise. 4 Yerg. R. 171; see, Com. Dig. Dett, A 5; Bac. Ab. Debt, F; 3 Wood. 103, 4; 1 Dall. R. 458.

When the action is on a simple contract, the declaration must show the consideration of the contract, precisely as in assumpsit; and it should state either a legal liability or an express agreement, though not a promise to pay the debt. 2 T. R. 28, 30. When the action is founded on a specialty or record, no consideration need be shown, unless the performance of the consideration constitutes a condition precedent, when performance of such consideration must be averred. When the action is founded on a deed, it must be declared upon, except in the case of debt for rent. 1 New R. 104.

The plea to an action of debt is either general or special. 1. The plea of general issue to debt on simple contracts, or on statutes, or when the deed is only matter of inducement, is nil debet. See Nil debet. In general, when the action is on a specialty, the plea denying the existence of the contract is non est factum; 2 Ld. Raym. 1500; to debt on record, nul tiel record. 16 John. 55. Other matters must, in general, be pleaded specially.

For the form of the judgment, see Judgment in debt. Vide Remedy.

DEBTEE.

1. One to whom a debt is due a creditor, as, debtee executor. 3 Bl. Com. 18.

DEBTOR, contracts.

1. One who owes a debt; he who may be constrained to pay what he owes.
2. A debtor is bound to pay his debt personally, and all the estate he possesses or may acquire, is also liable for his debt.
3. Debtors are joint or several; joint, when they all equally owe the debt in solido; in this case if a suit should be necessary to recover the debt, all the debtors must be sued together or, when some are dead, the survivors must be sued, but each is bound for the whole debt, having a right to contribution from the others; they are several, when each promises severally to pay the whole debt; and obligations are generally binding on both or all debtors jointly and severally. When they are severally bound each may be sued separately, and on the payment of debt by one, the others will be bound to contribution, where all had participated in the money or property, which was the cause of the debt.
4. Debtors are also principal and surety; the principal debtor is bound as between him and his surety to pay the whole debt. and if the surety pay it, he will be entitled to recover against the principal. Vide Bouv. Inst. Index, h.t.; Vin. Ab. Creditor and Debtor; Id. Debt; 8 Com. Dig. 288; Dig. 50, 16, 108 Id. 50, 16, 178, 3; Toull. liv. 2, n. 250.

Sources:

• Mojo Law

Before You File for Personal Bankruptcy:
Information About Credit Counseling and Debtor Education

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 launched a new era: With limited exceptions, people who plan to file for bankruptcy protection must get credit counseling from a government-approved organization within 180 days before they file. They also must complete a debtor education course to have their debts discharged. The Department of Justice's U.S. Trustee Program approves organizations to provide the mandatory credit counseling and debtor education. Only the counselors and educators that appear on the U.S. Trustee Program's lists can advertise that they are, indeed, approved to provide the required counseling and debtor education. By law, the U.S. Trustee Program does not operate in Alabama and North Carolina; in these states, court officials called Bankruptcy Administrators approve pre-bankruptcy credit counseling organizations and pre-discharge debtor education course providers.

Counseling and Education Requirements

As a rule, pre-bankruptcy credit counseling and pre-discharge debtor education may not be provided at the same time. Credit counseling must take place before you file for bankruptcy; debtor education must take place after you file. In general, you must file a certificate of credit counseling completion when you file for bankruptcy, and evidence of completion of debtor education after you file for bankruptcy - but before your debts are discharged. Only credit counseling organizations and debtor education course providers that have been approved by the U.S. Trustee Program may issue these certificates. To protect against fraud, the certificates are produced through a central automated system and are numbered.

Pre-bankruptcy Counseling

A pre-bankruptcy counseling session with an approved credit counseling organization should include an evaluation of your personal financial situation, a discussion of alternatives to bankruptcy, and a personal budget plan. A typical counseling session should last about 60 to 90 minutes, and can take place in person, on the phone, or online. Th e counseling organization is required to provide the counseling free of charge for those consumers who cannot afford to pay. If you cannot afford to pay a fee for credit counseling, you should request a fee waiver from the counseling organization before the session begins. Otherwise, you may be charged a fee for the counseling, which will generally be about $50, depending on where you live, the types of services you receive, and other factors. Th e counseling organization is required to discuss any fees with you before starting the counseling session. Once you have completed the required counseling, you must get a certificate as proof. Check the U.S. Trustee's website to be sure that you receive the certificate from a counseling organization that is approved in the judicial district where you are fi ling bankruptcy. Credit counseling organizations may not charge an extra fee for the certificate.

Post-Filing Debtor Education

A debtor education course by an approved provider should include information on developing a budget, managing money, using credit wisely, and other resources. Like pre-filing counseling, debtor education may be provided in person, on the phone, or online. Th e debtor education session might last longer than the pre-filing counseling – about two hours – and the typical fee is between $50 and $100. As with pre-fi ling counseling, if you are unable to pay the session fee, you should seek a fee waiver from the debtor education provider. Check the list of approved debtor education providers at www.usdoj.gov/ust/eo/bapcpa/ccde/de_approved.htm or at the bankruptcy clerk's office in your district. Once you have completed the required debtor education course, you should receive a certificate as proof. Th is certificate is separate from the certificate you received after completing your pre-filing credit counseling. Check the U.S. Trustee's website to be sure that you receive the certificate from a debtor education provider that is approved in the judicial district where you filed bankruptcy. Unless they have disclosed a charge to you before the counseling session begins, debtor education providers may not charge an extra fee for the certificate.

Important Questions to Ask When Choosing a Credit Counselor

It's wise to do some research when choosing a credit counseling organization. If you are in search of credit counseling to fulfill the bankruptcy law requirements, make sure you receive services only from approved providers for your judicial district. Once you have completed the required counseling, you must get a certificate as proof. Check the list at www.usdoj.gov/ust/eo/bapcpa/ ccde/cc_approved.htm or at the bankruptcy clerk's offi ce for the district where you will file. Once you have the list of approved organizations in your judicial district, call several to gather information before you make your choice. Some key questions to ask are: What services do you offer? Will you help me develop a plan for avoiding problems in the future? What are your fees? What if I can't afford to pay your fees? What qualifications do your counselors have? Are they accredited or certified by an outside organization?What training do they receive? What do you do to keep information about me (including my address, phone number, and financial information) confidential and secure? How are your employees paid?Are they paid more if I sign up for certain services, if I pay a fee, or if I make a contribution to your organization?

For More Information and Assistance The U.S. Trustee Program promotes integrity and efficiency in the nation's bankruptcy system by enforcing bankruptcy laws, providing oversight of private trustees, and maintaining operational excellence. The Program has 21 regions and 95 field offices, and oversees the administration of bankruptcy in all states except Alabama and North Carolina. For more information, visit www.usdoj.gov/ust.

The Federal Trade Commission works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. For more information about credit issues and choosing a credit counselor, visit ftc.gov/ credit. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866- 653-4261. If a credit counseling organization falsely advertises it is approved by the U.S. Trustee, please report this to the FTC via the toll-free number.

The Federal Trade Commission (FTC) is the nation's consumer protection agency. Here are some tips from the FTC to help you be a more savvy consumer:

• Know who you are dealing with. Do business only with companies that clearly provide their name, street address, and phone number.
• Protect your personal information. Share credit card or other personal information only when buying from a company you know and trust.
• Take your time. Resist the urge to 'act now.' Most any off er that's good today will be good tomorrow, too.
• Rate the risks. Every potentially high-profit investment is a high-risk investment. That means you could lose your investment - all of it.
• Read the small print. Get all promises in writing and read all paperwork before making any payments or signing any contracts. Pay special attention to the small print.
• 'Free' means free. Throw out any offer that says you have to pay to get a gift or a 'free' gift. If something is free or a gift, you don't have to pay for it. Period.
• Report fraud. If you think you've been a victim of fraud, report it. It's one way to get even with a scam artist who cheated you. By reporting your complaint to 1-877-FTC-HELP or www.ftc.gov, you are providing important information to help law enforcement officials track down scam artists and stop them!

Sources:

• Mojo Law
• Federal Trade Commission - ftc.gov

Personal Bankruptcy

Personal bankruptcy generally is considered the debt management option of last resort because the results are long lasting and far reaching. A bankruptcy stays on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job. Still, it is a legal procedure that offers a fresh start for people who can't satisfy their debts. People who follow the bankruptcy rules receive a discharge — a court order that says they don't have to repay certain debts.

The consequences of bankruptcy are significant and require careful consideration. Other factors to think about: Effective October 2005, Congress made sweeping changes to the bankruptcy laws. The net effect of these changes is to give consumers more incentive to seek bankruptcy relief under Chapter 13 rather than Chapter 7. Chapter 13 allows you, if you have a steady income, to keep property, such as a mortgaged house or car, that you might otherwise lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off your debts during a three-to-five-year period, rather than surrender any property. After you have made all the payments under the plan, you receive a discharge of your debts.

Chapter 7, known as straight bankruptcy, involves the sale of all assets that are not exempt. Exempt property may include cars, work-related tools, and basic household furnishings. Some of your property may be sold by a court-appointed official — a trustee — or turned over to your creditors. The new bankruptcy laws have changed the time period during which you can receive a discharge through Chapter 7. You now must wait eight years after receiving a dis- charge in Chapter 7 before you can file again under that chapter. The Chapter 13 waiting period is much shorter and can be as little as two years between filings.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments and utility shut-offs, and debt collection activities. Both also provide exemptions that allow you to keep certain assets, although exemption amounts vary by state. Personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. Also, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or security lien on it.

Another major change to the bankruptcy laws involves certain hurdles that you must clear before even filing for bankruptcy, no matter what the chapter. You must get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief. You can find a state-by-state list of government approved organizations at www.usdoj.gov/ust. That is the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees. Also, before you file a Chapter 7 bankruptcy case, you must satisfy a "means test." This test requires you to confirm that your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program at www.usdoj.gov/ust.

Sources:

• Mojo Law
• Federal Trade Commission - ftc.gov

Credit Tips

Under the FCRA, both the consumer reporting company and the information provider (the person, company, or organization that provides information about you to a consumer reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under the FCRA, contact the consumer reporting company and the information provider if you see inaccurate or incomplete information.

Tell the consumer reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report that you dispute, state the facts and explain why you dispute the information, and request that the information be deleted or corrected. You may want to enclose a copy of your report with the items in question circled. Your letter may look something like the one on page 8. Send your letter by certified mail, return receipt requested, so you can document what the consumer reporting company received. Keep copies of your dispute letter and enclosures.

Consumer reporting companies must investigate the items in question — usually within 30 days — unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it must investigate, review the relevant information, and report the results back to the consumer reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide consumer reporting companies so they can correct the information in your file.

When the investigation is complete, the consumer reporting company must give you the written results and a free copy of your report if the dispute results in a change. (This free report does not count as your annual free report under the FACT Act.) If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that the information is, indeed, accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider.

If you request, the consumer reporting company must send notices of any correction to anyone who received your report in the past six months. A corrected copy of your report can be sent to anyone who received a copy during the past two years for employment purposes.

If an investigation doesn't resolve your dispute with the consumer reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to provide your statement to anyone who received a copy of your report in the recent past. Expect to pay a fee for this service.

When negative information in your report is accurate, only the passage of time can assure its removal. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. There is no time limit on reporting information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you've applied for more than $150,000 worth of credit or life insurance. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place.

Sources:

• Mojo Law
• Federal Trade Commission - ftc.gov

Home & Auto Loans

Your debts can be secured or unsecured. Secured debts usually are tied to an asset, like your car for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your car or foreclose on your house. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services.

Most automobile financing agreements allow a creditor to repossess your car any time you're in default. No notice is required. If your car is repossessed, you may have to pay the balance due on the loan, as well as towing and storage costs, to get it back. If you can't do this, the creditor may sell the car. If you see default approaching, you may be better off selling the car yourself and paying off the debt: You'll avoid the added costs of repossession and a negative entry on your credit report.

If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to work with you if they believe you're acting in good faith and the situation is temporary. Some lenders may reduce or suspend your payments for a short time. When you resume regular payments, though, you may have to pay an additional amount toward the past due total. Other lenders may agree to change the terms of the mortgage by extending the repayment period to reduce the monthly debt. Ask whether additional fees would be assessed for these changes, and calculate how much they total in the long term.

If you and your lender cannot work out a plan, contact a housing counseling agency. Some agencies limit their counseling services to homeowners with FHA mortgages, but many offer free help to any homeowner who's having trouble making mortgage payments. Call the local office of the Department of Housing and Urban Development or the housing authority in your state, city, or county for help in finding a legitimate housing counseling agency near you.

Debt Consolidation

You may be able to lower your cost of credit by consolidating your debt through a second mortgage or a home equity line of credit. Remember that these loans require you to put up your home as collateral. If you can’t make the payments — or if your payments are late — you could lose your home.

What's more, the costs of consolidation loans can add up. In addition to interest on the loans, you may have to pay "points," with one point equal to one percent of the amount you borrow. Still, these loans may provide certain tax advantages that are not available with other kinds of credit.

Sources:

• Mojo Law
• Federal Trade Commission - ftc.gov

Credit Score

What is a Credit Score, and how does it affect my ability to get credit?

Credit scoring is a system creditors use to help determine whether to give you credit, and how much to charge you for it.

Information about you and your credit experiences, like your bill payment history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report.

Using a statistical formula, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor. A total number of points — a credit score — helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments on time.

Generally, consumers with good credit risks have higher credit scores.

You can get your credit score from the three nationwide consumer reporting companies, but you will usually need to pay a fee for it. Many other companies also offer credit scores for sale alone or as part of a package of products.

For more information, see Credit Scoring at ftc.gov/credit.

Sources:

• Mojo Law
• Federal Trade Commission - ftc.gov

Reduce Debt & Improve Credit

Having trouble paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car?

You're not alone. Many people face financial crises at some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or simple overspending, it can seem overwhelming. But often, it can be overcome. The fact is that your financial situation doesn't have to go from bad to worse.

If you or someone you know is in financial hot water, consider these options: realistic budget- ing, credit counseling from a reputable organization, debt consolidation, or bankruptcy. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future.

Develop A Budget

The first step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend. Start by listing your income from all sources. Then, list your "fixed" expenses — those that are the same each month — like mortgage payments or rent, car payments, and insurance premiums. Next, list the expenses that vary — like entertainment, recreation, and clothing. Writing down all your expenses, even those that seem insignificant, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.

Your public library and bookstores have information about budgeting and money management techniques. In addition, computer software programs can be useful tools for developing and maintaining a budget, balancing your checkbook, and creating plans to save money and pay down your debt.

Contact Your Creditors

Contact your creditors immediately if you're having trouble making ends meet. Tell them why it's difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. Don't wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.

Dealing With Debt Collectors

The Fair Debt Collection Practices Act is the federal law that dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m., after 9 p.m., or while you're at work if the collector knows that your employer doesn't approve of the calls. Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to stop further contact.

Sources:

• Mojo Law
• Federal Trade Commission - ftc.gov