Debt

 

Europe's Debt Crisis

Debt is anything owed, especially a sum of money that one person owes to another. A person who owes a debt is called a debtor, and the one to whom it is owed is the creditor. If the debtor is unwilling or unable to pay the debt, the creditor may sue to recover the money. If the court finds that the debt is owed, and if the debtor fails to pay, the creditor may apply to the court for an execution of judgment. This gives the creditor the right to seize enough property of the debtor to pay the debt and the creditor's legal costs. But there are exceptions as to what may be seized.

In a special type of debt called secured debt, the debtor promises that, if the debt is not paid on time, the creditor may seize specified property from the debtor  without applying to the court. If the value of the prop­erty is not enough to pay the entire debt, the creditor may then sue the debtor for the remaining amount. Most people purchase their homes through a type of se- : jred debt called a mortgage (see Mortgage).

Time limits on collection of debts. The courts ordi­narily state that debtors should pay their debts, even though the creditor does not demand payment. But if the creditor makes no effort to collect the money within a certain number of years, the debt becomes barred by a statute of limitations and can no longer be collected.

Penalties for debts. In ancient times, a debtor was handed over to the mercy of his creditors to become a slave. This was true in Greece and Rome, among the He­brews, and among the Saxons in England. During feudal times, however, every man was first of all a soldier, and armies would have broken up if overlords jailed their men for the debts they owed. (See: Greek debt crisis).

As feudalism declined, and trade and industry rose, harsh treatment of debtors was revived. Prison terms were the usual punishment, and thus no money was re­covered. Related articles: Attachment, Collection, Garnishment, Moratorium, Bankruptcy agency, Guarantee, National, Bond, Encumbrance, I.O.U. and debt.

Household Debts
Household debt not yet at alarming levels, said ZetyChanging social pressures may because of growth in household debt...

KUALA LUMPUR: The rapid growth in household debt and leverage in a number of countries may be symptoms of a larger change in the attitude of consumers.

According to Bank Negara governor Tan Sri Zeti Akhtar Aziz (pic), these included changing social norms such as societal peer pressure.

“This (high indebtedness) is also being reinforced by changing social norms, such as social pressure to spend, which has further eroded financial discipline among households,” Zeti said in her speech at the Citi-Financial Times financial education summit 2014 yesterday.

She said such pressures were further compounded by the rising cost of living in urban areas.

Zeti noted that the rapid growth in indebtedness was prevalent amid an ample liquidity and low interest rate environment at present.

Financial capability levels among consumers, have, however, generally lagged the broader socio-economic changes that were taking place and this resulted in poor financial management, she added.

On another matter, Zeti said that inclusive growth strategies and a balanced economic growth was an important imperative if socio-economic progress was to be achieved in societies.

“Economic growth and development, no matter how stellar, will begin to fade when inequality sets in and when income disparities widen.

“For several emerging economies, such conditions are reflective of the growing phenomenon of the urban poor, with significant implications for social stability and balanced growth,” Zeti added.

She noted that there needed to be strategies that targeted at preparing individuals at an early stage so that they may be more equipped to adjust to the new economic, financial and social realities, moving forward.

“The financial education agenda needs to deliver a sustained education programme that will equip all segments of the population with the necessary financial knowledge to save, invest and to insure against adverse events,” Zeti said.