Debt Glossary & FAQS

Our handy guide to some of the frequent terms use when discussing debt may prove useful.

 

Jump to FAQS

 

Administration Order (Individuals)

An order made in a county court to arrange and administer the payment of debts by an individual

 

Administration Order (Companies)

An order made by a court in respect of a company that appoints an administrator to take control of the company. A company can also be put into administration if a floating charge holder, or the directors or the company itself file the requisite notice at court.

 

Adverse Credit History

Also called sub-prime credit history, non-status credit history, impaired credit history, poor credit history and bad credit history. This indicates a credit rating that is often considered undesirable to lenders and therefore attracts higher interest rates, charges or special terms as they are deemed high risk.

 

Assets

Anything that is owned by the debtor that may be used to the debtors debts.

 

Bailiff

Can be appointed by the County Court if a lender has issued a CCJ which hasn’t been paid. A Bailiff is an official of court and has the power to seize goods and sell them at auction to settle a debt.

 

Bankruptcy

A legally declared inability or impairment of ability of an individual or organization to pay their creditors. Creditors may file bankruptcy for a debtor in an effort to recoup a portion of what they are owed. In the majority of cases, bankruptcy is initiated by the debtor (the bankrupt individual or organisation). See also Official Receiver

Bankruptcy Restrictions Order

A procedure whereby a bankrupt who has been dishonest or in some other way to blame for their bankruptcy may have a court order made against them or give an undertaking to the Secretary of State which will mean that bankruptcy restrictions continue to apply after discharge for a period of between two to fifteen years. Sometimes applicable to bankruptcy caused by gambling

 

County Court Judgements (CCJ)

In England and Wales (Scotland has its own legal system), CCJs are legal decisions made by County Courts. Judgments for financial reasons are entered on the Register of County Court Judgments, which is checked by credit reference agencies to assess the credit-worthiness of individuals.

 

Charging Order

A charging order is an order from the court placed on a debtor's property (house or land) for monies owed to a lender. In simplest terms, the unsecured debt becomes secured on the debtor's property

 

Credit Crunch

A credit crunch is a sudden reduction in the general availability of loans or credit.

 

Credit rating

Assesses the credit worthiness of an individual. Credit ratings are calculated from financial history (and current assets and liabilities). Typically, a credit rating tells a lender the probability of the subject being able to pay back a loan. A poor credit rating indicates a high risk of defaulting on a loan, and thus leads to high interest rates or special terms. See also Adverse Credit History.

 

Credit History / Credit File / Credit Reference Agency

A record of an individual's past borrowing and repaying, including information about late payments and bankruptcy. A credit reference agency is a company that provides this credit information on individual borrowers.

In the United Kingdom, the main credit reference agencies for individuals are Experian, Equifax, and Callcredit.

 

Creditor

A party (e.g. person, organization, company, or government) that claims that a second party owes the first party (usually) money.

 

Debtor

Someone who owes money to a creditor.

 

Debt Consolidation

The taking out of one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.

 

Debt Advice

Seeking advice from experienced professionals with the aim of resolving financial problems related to owing money. Read more about debt advice

 

Debt Help

A step on from debt advice (above) where a person seeks the active help from a person or business to manage their financial situation with a view to getting out of debt. Read more about DCM's debt help offerings

 

Debt Management Plan (DMP)

A DMP is an informal debt repayment arrangement between a debtor and their creditors. See our section on DMP's

 

Equity

The current market value of a property minus any outstanding loans. Also see negative equity

 

Full and Final Settlement

An offer to repay a percentage of the debt, on the condition the creditor agrees to write off the rest of the debt.

 

Hire Purchase (HP)

A legal term for a conditional sale contract. In cases where a buyer cannot afford to pay the asked price for an item of property as a lump sum but can afford to pay a percentage as a deposit, a hire-purchase contract allows the buyer to hire the goods for a monthly rent.

 

Individually Voluntary Arrangements

In the United Kingdom, Individual Voluntary Arrangements (IVAs) are a formal alternative for individuals wishing to avoid going into bankruptcy.

The aim of an IVA is to help you clear your debts at a reduced level over a fixed term, usually over a period of 5 years. Through the duration of the IVA you won't receive any further contact from your creditors, plus all interest and charges will be frozen. At the end of the IVA your financial situation will be reviewed.

 

Insolvency Practitioner (IP)

only an authorised or licensed Insolvency Practitioner may be appointed in relation to formal insolvency procedures. Quite often IPs have an accountancy background.

 

Mortgage

A type of loan secured on a property usually at lower interest rates than unsecured borrowing such as credit cards because the value of the property minimises risk.

 

Negative Equity

When the value of a property falls below the amount of loans and mortgages secured on it.

 

Notice of Default - Default Notice

A notification given to a borrower stating that he or she has not made their payments by the predetermined deadline.

 

Overdraft

An overdraft occurs when withdrawals from a bank account exceed the available balance which gives the account a negative balance - a person can be said to have gone "overdrawn"

If there is a prior agreement with the account provider for an overdraft protection plan, and the amount overdrawn is within this authorised overdraft, then interest is normally charged at the agreed rate. If the balance exceeds the agreed terms, then fees may be charged and higher interest rate might apply.

 

Official Receiver (OR)

The Official Receiver is the name of a statutory office holder in England and Wales.An officer of the court and civil servant employed by The Insolvency Service, who deals with bankruptcies and compulsory liquidations

 

Remortgage

Using a new mortgage to pay off an existing one, usually with the aim of achieving better repayment terms and/or releasing equity in the property. Also see Equity and Negative Equity

 

Repossession

Repossession is a legal process that occurs when a lender obtains a court order to take possession of a property due to non payment of the mortgage.

 

Secured Loan

A loan in which the borrower offers some asset (e.g. a car) as security for the loan. The loan is thus secured against the asset and in the event that the borrower defaults, the lender takes possession of the asset (the security) and may sell it to regain the amount originally lent to the borrower.

 

Statutory Demand

A formal notice requiring payment of a debt within 21 days, in default of which bankruptcy or liquidation proceedings may be commenced without further notice (Cannot be used where the debt is disputed). See our section on statutory demands

 

Store Card

A type of credit card associated with a retailer or group of retail stores which can only be for purchases from the retailers concerned. Store cards usually high interest rates.

 

Unsecured Debt

A financial term that refers to any type of debt that is not secured by any specific assets in the event of default.

 

Unsescured Loans

Loans that are not guaranteed with any asset, so that the risk of repossession does not exist. Though the lender can still take legal action in order to recover the money, such a legal process would be significantly longer and more expensive than with secured loans. Typical unsecured loans are credit card debt, bank overdrafts, and personal loans.

 

Trust Deed (Scotland only)

A formal arrangement that is used in Scotland where a consumer debtor grants a ‘deed’ in favour of the trustee which transfers their assets to the trustee for the benefit of creditors.

 

Trustee

A legal term that refers to a holder of property on behalf of some other beneficiary. Can be the Offical Receiver in Bankruptcy or Insolvency Practitioner in an IVA.

 

Sequestration

The act of removing, separating or seizing anything from the possession of its owner, particularly in law, of the taking possession of property under process of law for the benefit of creditors or the state.

 

glossary sources: Wikipedia & www.insolvency.gov.uk

 

 

FAQS

Will I lose my house if made bankrupt?

It's possible but we try to help stop this happening, unless it's something that is either unavoidable or what you want. See our bankruptcy section

 

What is a Statutory Demand?

See our comprehensive section on Stat Demands

 

How long does an IVA last for?

See of section on IVA's

 

What alternatives to bankruptcy are there?

Debt Management, IVAs and Loans are the main ones.

 

Can I get a mortgage if bankrupt?

See our section on bankruptcy, including the useful video.

 

Is it possible to stop a repossession order?

see our section on mortgage debt

 

How long does debt management last?

see our section on debt management

 

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