How do I pass a menu hook out to theme?

I know I have got to be missing something simple. But I'm trying to pass out the theming to a php template file for my module? I have my _menu hook calling the theme function and the theme_debtlist() function works fine. But the debtlist.tpl.php is not working. Here is where I call the theme

			$debts = array();
			
			do
			{
				$debt->creditor = $debt_node->creditor;
				$debt->credit_type = $debt_node->credit_type;
				$debt->balance = $debt_node->balance;
				$debt->name = $debt_node->name;
				
				$debts[] = $debt;				
			}
			while ($debt_node = db_fetch_object($result));
			
			$output = theme('debtlist', $debts);

Here is my theme_debtlist() function

function theme_debtlist($debts) {
	$creditOptions = Credit_Options();
	
	$output .= "<div>";
	$output .= "	<h3>Debt information Summary</h3>";
	$output .= "	<table style=\"width: 100%;\">";
	$output .= "		<tbody>";
	
	foreach($debts as $debt_index => $debt_node) {
		$output .= "			<tr>";
		$output .= "				<th>Creditor</th>";
		$output .= "				<td>" . $debt_node->creditor . "</td>";
		$output .= "			</tr>";
		$output .= "			<tr>";
		$output .= "				<th>Credit Type</th>";
		$output .= "				<td>" . $creditOptions[(int)$debt_node->credit_type] . "</td>";
		$output .= "			</tr>";
		$output .= "			<tr>";
		$output .= "				<th>Balance</th>";
		$output .= "				<td>" . $debt_node->balance . "</td>";
		$output .= "			</tr>";
		$output .= "			<tr>";
		$output .= "				<td><a href = \"/" . $debt_user->name . "/debt/" . $debt_node->nid . "\">View Debt</a> - <a href = \"/node/" . $debt_node->nid . "/edit\">Edit Debt</a></td>";
		$output .= "			</tr>";
	}	
	$output .= "		</tbody>";
	$output .= "	</table>";
	$output .= "</div>";
	
	return $output;
}

I created a debtlist.tpl.php file in my default theme directory with just the word "test" in it. But it's not overriding the theme_debtlist function.

Any ideas? I've gone over the privatemsg module which is doing something similar and I can't find any differences.

Thanks,

Nathan