Certificate of Debt: A Definition

Sarah Edwards | November 01, 2022

Legal Expert
Sarah Edwards, BS

Sarah Edwards is a professional researcher and writer specializing in legal content. An Emerson College alumna, she holds a Bachelor of Science in Communication from the prestigious Boston institution.

Edited by Hannah Locklear

Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Certificates of debt are like ^^

Summary: The purpose of a certificate of debt is to show the current amount that a person owes. Lenders, banks, businesses, and governments can use certificates of debt to ensure that they get their money back. If you’re struggling with debt, SoloSuit can help you respond to collectors and beat them in court.

A certificate of debt has several definitions, depending on the context of its use. Consumers, companies, and governments use certificates of debt for different purposes. Typically, the primary purpose of a certificate of debt is to show the current amount that the entity or individual owes another person or entity.

How does a certificate of debt affect consumers?

Individuals who own or purchase properties, like homes, land, or commercial buildings, will most likely encounter a certificate of debt. The certificate of debt provides a simple statement of the current value of the mortgage on the property.

Someone selling a home may ask their bank for a copy of their certificate of debt. Typically, the certificate of debt will list information such as:

The address of the property
The original amount of the mortgage
The current outstanding balance on the mortgage
The name of the property owner and identifying information

Some debt certificates will also provide an amortization schedule, which identifies how much of each payment goes to the principal and how much goes to interest. If there are any penalties associated with early repayment, the document will list those.

A certificate of debt helps the seller determine the fair price for selling their home. If the amount is too low, it won’t cover the cost of their outstanding mortgage with the bank, and they’ll need to settle the remaining amount out of pocket before the sale can proceed.

If the sales price of a home covers more than the mortgage amount, the seller will keep the additional amount as profit. They can use the profit as a down payment on a new home or to cover other obligations.

Sometimes, a consumer may request a certificate of debt from unsecured lenders like a credit card company. The information in the document will include the current loan balance and possibly the consumer’s payment history. A certificate of debt is helpful for individuals seeking to pay off their debts through debt consolidation or debt settlement.

Lenders can also provide certificates of debt for property such as a vehicle. You might want a certificate of debt for a car if you plan to trade it in or sell it. The document will tell you exactly what you owe, so you can determine whether you’ll still owe a balance after the trade or have money to put down on a different vehicle.

What does a business use a certificate of debt for?

Businesses have two primary ways of obtaining funding: raising equity or issuing debt. Raising equity brings in money in exchange for partial ownership in the organization.

Public companies can issue stock through an exchange, like Nasdaq or the NYSE. Private companies can grant equity to interested investors, who often come in as business partners or limited partners through a private equity fund.

Organizations that issue debt find willing lenders who can offer money in exchange for regular payments, similar to a loan. A lender of business debt usually has no part in business decisions. Instead, they simply receive regular payments from the organization, including interest.

A lender who provides financing to an organization through debt will give the organization a certificate of debt. Essentially, the certificate stipulates that the lender has rights to the debt and will state the total balance borrowed by the organization.

Organizations that don’t have access to debt through traditional means, like commercial lenders or banks, typically benefit from private loans.

How do governments use certificates of debt?

Governments use certificates of debt to raise funding for financing the needs of the country. The certificate of debt is known as a bond, and it’s a strategic way of obtaining money without raising taxes or turning to international lenders like the International Monetary Fund.

Both individuals and entities can purchase government bonds. Investors purchase the rights to a regular investment stream when they buy a bond. Bonds typically feature regular interest payments, and the investor receives the initial amount invested upon maturity.

Some bonds feature regular interest payments, typically made quarterly or yearly. However, some investors choose to receive the entire amount of the bond, including its interest, once the bond matures.

Governments may issue bonds for long periods, typically ten years or more. Bonds are attractive to investors seeking certainty in their investments. Unlike stocks, a bond retains its value despite micro or macro shocks to the economy. If the bond is for less than ten years, investors refer to it as a note.

Respond to a debt collector when they first contact you

If you’re struggling to manage your debt, you might have debt collectors calling and messaging you non-stop in the hopes of getting you to pay off your debt. There is a good chance that you don’t even recognize the debts they claim you owe.

You might not even owe any debt at all—they could be reaching out to the wrong person, have out of date debt records, or you might be a victim of identity theft.

Regardless, when you receive initial contact from a debt collector, sending a Debt Validation Letter can get them off your back. Requesting an official debt validation forces the collectors to prove, with written documentation and evidence, that the debt they are trying to collect is valid.

A debt is valid if the exact amount is correct and there is proof that the person being contacted about the debt actually owes it. If the debt collector purchased the debt, they must also prove that they have proper stewardship over it and the rights to collect on it.

Learn more about how a Debt Validation Letter can help you in this video:

Beat debt collectors in court

If you’ve been sued for a debt, the first step to winning your case is to respond with a written Answer. You must file your Answer into the case before your state’s deadline, which could be anywhere from 14-35 days.

In your Answer, you should respond to each claim made against you and assert your affirmative defenses. You can draft and file your Answer in all 50 states with SoloSuit—all in just 15 minutes!

What is SoloSuit?

SoloSuit makes it easy to fight debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.

SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

Respond with SoloSuit

"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James

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>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate