A

Accounts Payable

Amounts owed by to a creditor for goods or services obtained by debtor.

Administration of Justice Act 1970

This Act relates to debt collectors and their ethical practice.

Administration order

An administration order is make in county court and the order will arrange the payment of debts to a creditor. This order can also be made for a company and an administrator will be appointed to take control of the company and finances.

Annual Percentage Rate (APR)

The percentage of interest that you will endure over a year.

Annulment

This is another word for cancellation.

Arrears

When an individual falls behind on their minimum monthly payments.

Assets

An item of ownership which can be converted into cash value in order to pay off your debt, such as your house.

B

Bailiffs

Are employed to take your assets so that they can be sold to cover your overdue debts.

Bankruptcy

When an individual becomes legally declared insolvent as they are incapable of settling their debts.

Bankruptcy Order

The court order which declares someone as being bankrupt.

Bankruptcy Petition

A request to the court, made by either the debtor or their creditors, for the debtor to be declared bankrupt and the reasons why this should happen.

Base Rate

The lowest interest rate charged by a bank.

C

Capital

The overall amount of money/assets remaining after any liabilities have been deducted.

County Court Judgement (CCJ)

When a judgement is ruled against an individual in Court, stating that they will have to pay back any debts that owe to the lender.

Credit Rating

The rating which is used by many financial companies to see if you would be a reliable, safe individual to lend credit to.

Creditors

A person or company to whom you owe money.

Current Account

A bank account which is able to offer a number of services such as cheque book and overdraft, which is most commonly used for outgoing transactions.

D

Debt

Money that is owed back to a company/person, from where it was borrowed.

Debt Consolidation

When your debt is restructured into one single affordable monthly payment.

Debt Management Plan

A repayment scheme which helps an individual manage their debts. Please contact one of our advisors to see how this could help you 0800 019 5870.

Debtor

The person who owes the debt.

Default Notice

A notice which is issued by the creditor after a previous arrangement has failed. It will inform the debtor that the company is intending to take it to the next level to recover their money.

Disposable Income

The income that is remaining to spend after all essential expenses have been made.

E

Earned Income

The amount of income which comes from employment or pensions, as opposed to any unearned such as bank interest.

F

Finance

To raise money through the sale of assets.

Full and Final Settlement

A Full and Final Settlement is where the debtor pays a lump-sum amount to their creditors at a lower amount than the full debt. The creditor will agree to accept this lower amount and write off the remaining debt. 

G

Gross Income

The amount of income that one has before any deductions.

Guarantor

In the event that an individual will be unable to meet their financial obligations, the guarantor will have to make the repayments.

I

Income Payments Order

A Bankruptcy Trustee will apply to court for an Income Payments Order, which means that a certain amount of the debtors income must be paid their creditors.

Individual Voluntary Arrangement (IVA)

When an individual comes to an agreement with their creditors, about paying a fixed amount of their debt, typically over 60 months. Any debt remaining after this time frame is usually written off.

Insolvency Practitioner (IP)

The IP is legally recognised as a licensed financial expert, who will be able to deal with any Insolvency procedures, such as an IVA or bankruptcy.

Insolvent

When a person is no longer able to settle their debts when they are payable.

Interest Rate

A percentage charge which is set out on the money that you borrow.

J

Joint Liability

The legal liability that more than two people will have on any debts that they incurred together.

Judgement

A judicial ruling which is given within a court of law, which will result in an obligation by one party.

Jurisdiction

The authority of a court to deal with legal proceedings.

L

Liquidator

Refers to the Insolvency Practitioner or Official Receiver who has been appointed to administer the liquidation of a company or partnership.

Litigation

A legal proceeding in court, where a person or company takes legal action against another.

Loan

A money advance which is given over a period of time, where regular repayments will often follow along with an interest rate.

M

Mortgage

A loan which is offered on a property or land, usually set over a long period of time.

O

Ombudsman

An independent official which will investigate any complaints that an individual has about a financial institution.

P

Personal Loan

Loans which are given by a variety of financial institutions for your personal use.

Priority Debts

Priority is given to your mortgage, rent, secured loan, utilities, council tax etc, on the basis that if you don't pay them, you could be at risk of losing your home or the service.

Proxy

The authority given to an individual who is able to vote and speak on behalf of the creditor.

R

Remortgage

When a previously mortgaged property is replaced by another, this might come into effect so you can get a lower interest mortgage.

Repossession

When a creditor to whom you owe a debt, that cannot be paid, can take your personal possessions to fund it.

S

Second Mortgage

When another mortgage is taken out on a property which is already mortgaged, this might be used to raise capital. A Second Mortgage usually carries a higher rate of interest.

Secured Debt

When money is borrowed against a secured asset, this could be a house or a car. If the debtor fails to keep up repayment, then the asset can be demanded as payment.

Statutory Demand

A notice which will require, within 21 days, the repayment of a debt exceeding £750, or the debtor may face bankruptcy proceedings against them.

T

The Protection from Harassment Act 1997

Makes it a criminal  offence for debt collectors to excessively harasses a debtor for payment.

Trustee

In bankruptcy, the Trustee is either the Official Receiver or Insolvency Practitioner. They will take control of a debtors assets by selling them and distributing the funds between creditors.

U

Unsecured Debt

A debt which is not secured against any asset.

Utilities

What are regarded as essential services, such as electricity.

Entering into an IVA may adversely affect your credit rating for up to six years from the date of approval.

Your property will be protected within an IVA but you may be required to release all or part of any equity during the period of the arrangement.

Failure to complete the term of an IVA can result in bankruptcy.

(In Scotland, a PTD is the equivalent to an IVA.)