Debt Advice Glossary

Accountant in Bankruptcy

The Scottish Government office that supervises all personal insolvencies in Scotland. (sequestration and trust deeds). Often referred to as AiB. www.aib.gov.uk.

Acquirenda

Any asset acquired or received by a debtor after the date of insolvency and before the date of his discharge.

Administration Order

If you have at least one County Court Judgement (CCJ) and your total debts are not more than £5,000, you may be eligible for an Administration Order. You make one payment to a County Court, and it would act as a payment distributormaking payment to all your creditors on a pro-rata basis.

As long as there is a valid Administration Order in place, interest is stopped and you are protected from further recovery action (England & Wales only).

Annulment

Where a Court cancels a Bankruptcy Order putting you back in the position as if the Bankruptcy Order had never been made (England & Wales only).

Apparent Insolvency

A Scottish legal term indicating a person is unable to pay their debts and that at least one of their creditors has taken legal action against them.

APR

Annual Percentage Rate, the interest added to a credit agreement on a yearly basis (such as a credit card or personal loan).

Approved Advisor

See DAS Approved Advisor.

Assignment

When a debt is sold to another organisation for collection eg from a bank to debt collection agency.

Arrears

When either full or part payments are missed on household bills or credit agreements eg mortgage, council tax, gas, credit card, hire purchase.

Assets

Items you own that have a monetary value, for example equity in a property, savings, antiques, etc.

Attachment of Benefits

If you have a County Court Judgement against you but have failed to make payment, deductions may be taken from your benefits at the rate of 5% of the personal allowance. The Attachment would exist until the debt had been paid in full (England & Wales only).

Attachment of Earnings

If you have a County Court Judgement against you but have failed to make payment, deductions may be taken from your earnings at a rate decided upon by the Court. Council Tax arrears are dealt with in a different way via the Magistrates Court (England & Wales only).

Attachment Order

The seizure of goods outside the home by Sheriff Officers to be realised for the benefit of the pursuing creditor. This takes place after Decree has been granted, and a Charge for Payment has been served and expired (Scotland only).

Bailiffs

If you have a County Court Judgement against you but you have failed to make payment, a Bailiff can be instructed to enter your property in order to seize goods with the intention of selling them at auction. Any monies raised would be given to the creditor who obtained the CCJ (England & Wales only). See www.bailiffadviceonline.co.uk for further information.

Balloon Payment

A lump sum payment normally due at the end of a hire purchase or conditional sale agreement (typically used in car sales).

Bank Account Arrestment

See Frozen Account.

Bankruptcy

A formal legal procedure that allows a person to write off their debts. An individual can make themself bankrupt, or a creditor can ask a Court to make someone bankrupt. In Scotland, the bankruptcy system is different to that of England & Wales, but the underlying principle is the same. If there are any assets, they usually have to be sold for the benefit of the creditors.

CCJ

See County Court Judgement.

Certificate of Discharge

A certificate that can be obtained from the Accountant in Bankruptcy on request to prove the debtor has been discharged from bankruptcy. A small fee (currently £10) is payable. (Scotland only).

Certificate of Satisfaction

A certificate issued by the court to prove a CCJ or Attachment of Earnings has been paid. A fee of £10 is required (England & Wales only).

Charge for Payment

The formal demand for payment following a Decree. It is a legal document served by Sheriff Officers, giving a debtor 14 days to pay the particular debt in full (Scotland only).

Charging Orders

Under The Charging Orders Act 1979, creditors who have obtained a CCJ or High Court Judgement are able to secure the debt to an asset the debtor may have. This can only take place if you have defaulted on payments due to the CCJ (England & Wales only).

Consolidation

Obtaining a loan sufficient to pay off all debts, thereby consolidating into one debt.

Contractual Payments

Payments you have agreed to make at the outset of a credit agreement.

County Court Claim

A formal document that advises a creditor has started legal proceedings in order to recover their debt. If you ignore the form, or don't respond within 14 days, a County Court Judgement will be granted by default and the whole amount will be due for payment immediately (England & Wales only).

County Court Judgement/CCJ

A judgement issued by a County Court stating you owe a specific creditor a particular amount of money and must make payments to that debt (England & Wales only).

Credit Reference Agency

Authorised companies who record information on your credit history. There are 3 in the UK - Experian, Equifax and CallCredit (www.experian.co.uk, www.equifax.co.uk, www.callcredit.co.uk).

Credit Reference File

Information provided by your creditors on your past and present credit history. Prospective lenders will use these files to produce a credit score, which will determine whether they will lend to you or not.

Credit Score

There is no such thing as a universal credit score in the UK, each lender will assess your credit history differently depending on their own attitude to risk. So what is acceptable to one lender, may not be acceptable to another.

Creditor

A person or company that you owe money to, for example a credit card company or bank.

DAS

See Debt Arrangement Scheme.

DAS Administrator

Civil servant who oversees the work of the DAS Approved Advisors, makes decision on DPP applications, variations and revocations. The DAS Administrator is based within the Accountant in Bankruptcy, although DAS is not insolvency (Scotland only).

DAS Approved Advisor

A money advisor in Scotland who is approved by the Scottish Government to assist debtors with the Debt Arrangement Scheme. See www.moneyscotland.gov.uk for a list of approved advisors (Scotland only).

Debt Arrangement Scheme (DAS)

A Scottish Government scheme that allows you to repay your debts in full via a Debt Payment Plan (DPP), with the advantage that no interest or charges can be added, your assets are protected and once approved, all your creditors are legally bound by its terms. Official website is www.moneyscotland.gov.uk. (Scotland only).

Debt Collection Agency

Commercial organisations that specialise in collecting debts on behalf of other organisations, used frequently by most major lenders.

Debt Management Plan (DMP)

An informal agreement between you and your creditors allowing you to repay your debts at an affordable rate. Creditors do not have to accept such offers, or freeze interest and charges and they can opt out at any time.

Debt Payment Programme (DPP)

The legally binding repayment arrangement introduced by The Debt Arrangement Scheme (Scotland only).

Debtor

The person who owes the debt.

Decree

A formal order of the Sheriff Court, stating that a debtor owes a specific creditor a specific amount of money. The creditor concerned must enforce this Decree before money can be collected, see Charge for Payment (Scotland only).

Default Notice

A notice issued by a creditor when a financial agreement that was been made between you and your creditor fails because the arrangement has not been kept. A default notice is the lender informing you that they are intending to take step to recover the money you owe them.

Deficit

When you have more money going out than you have coming in.

Dependents

People who rely on others for their living requirements and have no income of their own, for example children.

Distress

This is the right for anyone whom rent is payable to, to sell debtors goods to contribute to the rent arrears (England & Wales only).

DMP

See Debt Management Plan.

DPP

See Debt Payment Programme and Debt Arrangement Scheme.

Earnings Arrestment

Scottish equivalent of an Attachment of Earnings Order, where the court can order a sum of money to be regularly deducted from a debtor's salary in order to repay a debt. If more than one creditor applies to do this, it is referred to as a Conjoined Earnings Arrestment.

Equity

The difference between the value of an asset (usually property) and the amount secured on it (usually a mortgage). If a mortgage on a house was £100,000, but the market value was £130,000, then the equity would be £30,000.

Exceptional Attachment Order

The seizure of goods inside the home by Sheriff Officers to be realised for the benefit of the pursuing creditor. This takes place after Decree has been granted, and a Charge for Payment has been served and expired. Permission has to be granted by the Sheriff Court, after all other reasonable methods of recovery have been attempted (Scotland only)

Final Discharge

A final discharge will be posted to you to show the end of your bankruptcy. This document will mean you are free from debt and the bankruptcy is over (England & Wales only).

Frozen Account

A bank account can be frozen by a creditor to protect any funds that are in it via a Bank Account Arrestment and can only be unfrozen once the debt has been satisfied or an arrangement has been reached with the creditor and they provide their agreement to have it unfrozen.

Gratuitous Alienation

With regard to insolvency, disposing of an asset for less than its market worth (Scotland only).

Guarantee

When a person signs a credit agreement alongside the principal debtor, basically agreeing to become liable for the debt if the principal debtor defaults.

Hire Purchase

A credit agreement where ownership of the goods remains with the creditor until the last payment has been made, and title transfers over to the debtor. Typically common in car purchases.

Income Payment Agreement/Order

In bankruptcy, the Official Receiver or Trustee can apply for an Income Payment Order if they feel that the debtor can afford to make a regular contribution into the bankruptcy, which would then be distributed for the benefit of the creditor. The IPA is more of a voluntary arrangement, whereas the IPO tends to be used in cases where the debtor is not co-operating.

Individual Voluntary Arrangement/IVA

This is a formal agreement between a debtor and their creditors, an IVA proposal sets out how the debtor intends to repay creditors usually over a 5 year period. An IVA has to be set up by a licensed Insolvency Practitioner (England & Wales only).

Inhibition

Inhibition is a procedure which allows a creditor to inhibit the debtor's ability to dispose of their property, grant a security over the property without first settling that creditor's debt (after any previously existing securities such as a mortgage. An inhibition does not give the creditor to right to repossess or sell the property (Scotland only).

Insolvency

Where liabilities (debts) outweigh assets, and/or having insufficient funds to meet all debts, or being unable to pay debts as and when they fall due.

Insolvency Practitioner/IP

A professional person who specialises in insolvency, they are recognised by the appropriate board (such as the Institute of Chartered Accountants for Scotland) and are fully qualified to deal with your insolvency.

Interim order

An interim order halts bankruptcy and other legal proceedings for an individual who intends to make IVA proposals (England & Wales only).

IP

See Insolvency Practitioner.

IVA

See Individual Voluntary Arrangement.

Joint & Several Liability

A credit agreement (such as a joint bank loan) or liability (such as council tax)where two people are equally liable for the full debt, each person is not just liable for half should one party fail to repay. The creditor, of course, cannot expect each person to fully repay the debt.

Judge

In terms of debt or insolvency, a Judge is the public official who would hear cases in the County Court (England & Wales only), in Scotland the equivalent would be a Sheriff within the Sheriff Court.

Lender

A person or company who lends you money (for example a bank).

Levy

When a bailiff retrieves payment or goods to raise the sum on the warrant and costs. Notice of this comes 7 days before the bailiffs arrive (England & Wales only).

Liabilities Order

If Council Tax is not paid 28 days after it has become due, a court summons is issue. If the debt remains unpaid, a Liability Order is issued. It allows a local authority to recover the arrears by deductions from benefits or earnings (England & Wales only).

Nominee

Normally, an Insolvency Practitioner, a Nominee is the person chosen by a debtor to deal with IVA proposals (England & Wales only).

Official Receiver

Also known as Trustee in Bankruptcy, The Official Receiver (or Trustee in Bankruptcy) deals with the administration for bankruptcies (England & Wales only).

Overdraft

An overdraft is when the value of transactions on your bank account exceeds the account balance. If your bank allows you to be overdrawn, you will have an agreed overdraft limit but if you have not agreed limit, this is an unauthorised overdraft and will likely incur charges and interest.

Proof of Debt Form

Creditors can submit this form in order to lodge their claim against a bankruptcy or IVA (England & Wales only).

Property Restriction

During the lifetime of an IVA, a creditor may put a restriction on your property to prevent you from selling. (England & Wales only).

Pro-Rata

This means 'in proportion to' and is a method of calculating creditor repayments based on the balances owed - whoever is owed gets the most. For example if one creditor represented 30% of the debt total, they would be offered 30% of the total repayment offer.

Protected Trust Deed

A formal, legal agreement with creditors whereby the debtor pays an agreed monthly contribution (usually over 36 months) and at the end of the trust deed any remaining debt will be written off. The debtor has protection from further creditor recovery action. The Trustee (an IP) may realise any assets for the benefit of creditors (Scotland only). See also Trust Deed.

Realise

Realising an asset means selling it or disposing of it to raise money, for example in a Protected Trust Deed or IVA, the IP may realise an asset for the benefit of your creditors.

Register of Insolvencies

A public register maintained by the Accountant in Bankruptcy in which details of all sequestrations awarded are recorded. The Register also contains details of protected trust deeds.

Repossession

If a loan secured on a property is not kept up to date, the lender has the eventual right of repossession - basically taking the property back with the intention of selling it to someone else in order to clear your debt.

Revocation

A procedure within the Debt Arrangement Scheme which would, if granted by the DAS Administrator, would bring to an end a person's DPP (Scotland only).

Right to Off-Set

If you have more than one account with an organisation, and fall into arrears with one of these accounts, the company has the right to off-set the arrears with any funds you may have in other accounts held with them. The company does not need your permission for this.

Secured Debt

A loan that is secured on an asset, for example a property, means that if you default on the payments, the lender can force the sale of the asset in order to recover the debt.

Sequestration

The Scottish legal term for bankruptcy.

Sheriff

In terms of debt or insolvency, a Sheriff is the public official who would hear cases in the Sheriff Court (Scotland only), in England & Wales the equivalent would be a Judge within the County Court.

Sheriff Officer

An officer of the Sheriff Court who is responsible for service court documents and enforcing court orders (Scotland only).

Statement of Affairs

A document which contains details of the assets and liabilities of a debtor, completed prior to bankruptcy, protected trust deed or IVA. Providing false or misleading information can be a criminal offence.

Statutory Demand

Being served with this legal document means you have 21 days to pay the debt in full, otherwise bankruptcy proceedings by the creditor can commence.

Summary Warrant

This is a quick procedure for some public bodies to recover debts as it involves only an application to the Court and no hearing is held. It is used mainly by local authorities and HMRC (Scotland only).

Surplus Income

What you have left over from your income after your essential household expenditure has been met, such as mortgage/rent, utilities, food, childcare, etc. It generally does not include creditor repayments.

Time Order

In certain circumstances, a Court can make changes to a consumer credit agreement such as varying the interest rate. This procedure is rarely used.

Time to Pay Direction/TTPD

Application to the Sheriff Court for time to pay a debt, prior to Decree being granted. Traditionally, the Courts have not been very generous with the timescales and most TTPD's are only over a couple of years. If the Court agreed to the proposals, it would grant an Instalment Decree (Scotland only).

Time to Pay Order/TTPO

Application to the Sheriff Court for time to pay a debt, after Decree has been granted. Traditionally, the Courts have not been very generous with the timescales and most TTPO's are only over a couple of years (Scotland only).

Token Payments

Making very small payments to your creditors, perhaps as low as £1.00 per month. This is not a useful long-term debt solution but can be used when someone's financial difficulties are temporary.

Transactions at an undervalue

If, prior to bankruptcy proceedings, a debtor attempts to transfer an asset (such as a property, vehicle or expensive item) into the name of a family member or friend, in the hope that it will be excluded from the bankruptcy estate, the Official Receiver or Trustee can examine the debtors previous finances (up to 10 years prior to the bankruptcy) to establish if the asset was transferred for less than the market value (England & Wales only).

Trustee

Either the official receiver or the insolvency practitioner who will take control of the selling of assets during an IVA, protected trust deedor bankruptcy.

Trust Deed

Formal proposal to creditors by a debtor via an IP for partial repayment. If the majority of creditors agree, the trust deed will become 'protected, affording the debtor protection against recovery action (Scotland only).

Unsecured debt

A credit agreement that does not have security over any asset or property. Common examples would be credit cards, store cards, mail order accounts, personal loans. In these cases, if you stop paying, the creditor has to pursue you through the court process, they cannot force the sale of your property or assets.

Variation

A procedure within the Debt Arrangement Scheme where arrangements can be altered due to a change in circumstances, either for better or worse (Scotland only). Not to be confused with a Variation Order which refers to a CCJ.

Variation Order

If a CCJ has been granted but due to unforeseen circumstances, the debtor can't pay, an application to vary payments can be made (England & Wales only). Not to be confused with the Debt Arrangement Scheme variation procedure in Scotland.

Warrant of Execution

If debtors have failed to pay a CCJ and no Variation Orders has been made, a Bailiff can go to the debtor's property and acquire goods to the value of debt (England & Wales only).

Windfalls

Any assets that a debtor acquires during an IVA or bankruptcy will be realised for the benefit of creditors (England & Wales only).

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