CREDITOR (Lat. creditor, one who trusts, from seeders, to trust). In its broadest sense, any person in whose favor a legal obligation exists, whether that obligation arises from the mutual assent of the parties, as in the ease of contract (q.v.), or from a rule of law, as in the case of a tort (q.v.). The term is ordinarily applied, however, in legal usage only to him who has voluntarily given credit to another.
A general (simple or unsecured) creditor is one who has no /ice (q.v.) on any property, and has only a personal claim or right of action against the debtor. If a lien on property has been given to him by way of collateral security, mortgage, or pledge, he is called a secured creditok If the debtor or the law secures a priority to one creditor, or to a class of creditors over others, such favored ones are said to be preferred credi tors. In the absence of statutory provision to the contrary, a debtor may pay one creditor hi preference to others, or he may make an assign ment for the benefit of creditors, and direct that one or more shall be paid in full before anything is paid to the others.
The common law gave certain creditors a pri ority over others. For example, creditors of a deceased person were to be paid out of his estate in the followine. order: (1) those having claims
for funeral and probate expenses; (2) the State; (3) judgment creditors; (41 landlords having claims for rent, and bond creditors, that is, those who held bonds or sealed contracts of the de ceased; (5) creditors by simple contract. This order has been modified to some extent by statute in the different States, and such legislation must be examined for detailed information on this point. The insolvency statutes of some States give a preference to the employees of an insolvent debtor over other creditors. Under the United States Bankruptcy Law of 1898, a prefer ence given by the bankrupt to a creditor within four months before the institution of bankruptcy proceedings may he avoided by the trustee in bankruptcy; but the act secures a preference to workmen, clerks, or servants for wages earned within three months before the commencement of proceedings, not to exceed $300 to each claimant.
When a person obtains a judgment for money against another, he is called a judgment creditor; and if an execution is issued and levied. he be comes an execution creditor. See CONTRACT; An