Common Debt Terms
There are many terms exclusive to the debt management industry. Below are some of the most common, with a definition for each.
Refer to this glossary as necessary while reading our site and contact us for an explanation of any terms not listed here.
Simply click on any of the phrases below and it will expand out, giving you a more detailed definition.
Alternatively, you can use the search box located at the top of each page to locate pages on particular topics.
If total debts are £5,000 or less and at least one County Court Judgment has been filed, an individual may qualify for an Administration Order. This debt management solution permits a County Court to administer payments to creditors. The debtor issues a single payment to the court to cover all debts and the court distributes a portion of the payment to each creditor, based on how much is owed. Interest stops accruing and creditors may not take further action when an Administration Order is in place.
When a person does not make the contracted payments for household bills. Failing to make rent, mortgage, or council tax payments can result in serious arrears, which should immediately be paid. An individual can also get into arrears by failing to make unsecured debt payments. Continuing to miss payments causes arrears to accumulate. Until arrears have been cleared, the individual must make the regular payments and an additional amount.
An asset is an owned item that has monetary value, such as a car, shares, stock, property, savings, or antiques.
Assignment occurs when a creditor sells a debt to another organization. This is not the same as a creditor turning debt over to a collection agency to act on its behalf.
Failing to make repayments following issuance of a County Court Judgment entitles the council to make deductions from benefits. The permitted deduction equals five percent of the personal allowance for a single person age 25 or older. An Attachment of Benefits continues until the associated benefit is discharged.
Failing to pay money ordered within a County Court Judgment allows a creditor to apply to the court to request deduction from wages. The court approves this Attachment of Earnings and determines the deduction amount. The Magistrates’ Court handles Attachment of Earnings orders regarding council tax.
An individual working for the court who removes items from the residence of a debtor. The items are taken to be sold at auction to cover debt owed under a CCJ that has not been paid as agreed.
A lump sum payment made on a conditional sale or hire purchase agreement following a series of monthly payments.
A legal procedure designed to write off debts, with several exceptions. A debtor or creditor may petition for bankruptcy and covered debts are usually discharged following a two or three-year period. If a bankrupt individual has equity in assets, including property, the items may be sold to repay existing debts.
A court-issued certificate verifying the repayment required by an Attachment of Earnings or CCJ.
This document is used in Scotland and is similar to the CCJ used in Wales and England. It orders an individual to repay an existing debt within a provided timeframe.
Under the Charging Orders Act 1979, creditors with a CCJ or High Court Judgment may secure a debt to assets of the debtor. A Charging Order may only be issued if the debtor defaults on CCJ payments.
An Individual Voluntary Arrangement for a business. Creditors must approve this voluntary debt repayment agreement that allows the business to continue trading.
Payments agreed to by signing a credit agreement. If an individual does not make contractual payments to creditors, arrears may result, which could affect the credit rating.
A court-issued judgment requiring a debtor to make payments on debt that were not made according to the original lender agreement and for which no attempts have been made to reach a repayment agreement.
A formal document notifying a debtor that a creditor has initiated legal proceedings. The debtor has 14 days to provide a response. If no response is issued, a judgment will be registered by default. An order will then be issued to immediately repay the entire balance.
A file containing financial history of an individual, including credit applications and credit utilized.
An organization (typically a credit card company, bank, or building society) or individual serving as a lender for another person. This term and “lender” are used interchangeably.
An organization that purchases debt or works for a creditor and attempts to recoup the outstanding balance. A debt collection agency does not have as much debt collection power as a bailiff.
An individual who is in debt and who must repay creditors.
A creditor-issued notice sent when the financial agreement between a debtor and a creditor fails due to non-compliance on the part of the debtor. The creditor sends this notice to inform the debtor that it intends to take action to recover the money it is due.
When expenses exceed income. Increasing income or reducing expenses can address the situation.
Someone who does not have income and relies upon another person to pay living expenses. A child or a homemaker is considered a dependent.
The right that a property owner has to sell items owned by a tenant to help cover an arrears in rent.
This is the Scottish equivalent of an Attachment of Earnings. The Scottish court requires a deduction from the wages of the debtor to repay outstanding debt.
The difference between the current market value of a property and the value of any mortgage held against it. If the total amount of loans secured on the property exceeds the market value of the property, a situation of negative equity exists.
Translated to “without attendance,” this refers to applications made to a court without the applicant attending in person.
This document is provided to an individual to indicate the end of his or her bankruptcy. It officially verifies that the bankruptcy has concluded and the individual is debt-free.
Providing false information to deliberately deceive someone for a particular advantage.
When a third party, called a guarantor, assures a creditor that a debtor will make repayments. The guarantor is liable for any debt payments that the debtor fails to make.
A pre-arranged asset purchase that allows an individual to retain the asset as long as he or she makes agreed repayments. Once full repayment has been made, the asset is considered property of the individual.
What a trustee or official receiver applies for during a bankruptcy if the person believes the debtor can afford a regular financial contribution. If the order is approved, the bankrupt individual must make the designated payments, which are distributed to creditors.
When a debtor arranges with creditors directly to make reduced payments. There is no third party involvement.
Being unable to repay debts when due or having insufficient money to make a debt payment.
An individual who has been recognized by a relevant board as qualified to handle insolvency.
When a credit agreement is taken with another person, both individuals are considered liable for the entire debt. If one of the parties fails to repay debt, the creditor may ask the other party to repay the entire balance, not just half of the debt. This option is usually available for an overdraft or loan. A credit card is not usually issued in joint names. Though there may be two cards, each with a different name, only one person is usually listed as the account holder.
An organization or person who lends money (usually a credit card company, building society, or bank). This term and “creditor” are used interchangeably.
Retrieval of goods or payment to cover a warrant and associated costs. Notice of a levy is typically provided seven days before a bailiff arrives at the property.
After a payment for council tax is 28 days late, the council complains to the Magistrates’ Court and a summons is issued for a hearing to determine whether a Liability Order should be issued. The Liability Order is the court notification that amount of council tax reflected on the summons has not been paid. Authorities may arrange for the arrears to be repaid through benefits or wage deduction.
Also called winding up, this occurs when a company or business is made bankrupt or terminated, the company assets are sold, and proceeds are used to repay creditors. Money that remains is distributed to shareholders.
Also called the Trustee, this individual administers bankruptcies. After interviewing a bankrupt individual, this person determines whether assets must be sold to repay creditors.
A form submitted by a creditor to claim that it is owed money by an individual filing for a bankruptcy or IVA.
A creditor covered by an IVA may place a restriction on property owned by the debtor. This restriction usually only applies during the period that the IVA is in place.
Translated to “in proportion to” and used to represent the payment to a individual creditor based on the total repayment made.
An individual assigned by a creditor to attend a creditor meeting and vote on behalf of the organization.
An individual may be in arrears with a loan or credit card account with a creditor but also have a current account with the organization. The Right to Off-Set entitles the creditor to use funds from the current account to repay the arrears, without the permission of the account holder.
Borrowed money secured by an asset, such as a car or house. If the payment terms are not adhered to, the lender may return or sell the asset securing the loan in order to recoup the money it is due.
Legal document that requires a debtor to make a lump sum payment or installment payments toward an existing debt or to secure the debt against property.
Also called available surplus, this is the amount of money remaining after living expenses are deducted from income. Surplus income is considered the amount of money available to creditors.
Document that allows the court to alter the consumer credit agreement. A Time Order is useful when a creditor will not agree to debt payments or will not freeze interest.
When an individual is unable to make repayments in the agreed amount to a creditor but makes a smaller payment. The idea is that it is better to make some payment than not pay anything.
Prior to a bankruptcy proceeding, a debtor may transfer an asset (ex. a vehicle or property) into the name of another person in an effort to have it excluded from the estate. The Trustee or Official Receiver is entitled to examine financial records of the debtor dating up to ten years before the bankruptcy. This allows the Trustee or Official Receiver to determine whether an asset was transferred for less than market value. The Trustee or Official Receiver can then apply to have the asset sold and use the equity to repay creditors.
The Insolvency Practitioner or Official Receiver who controls asset sale during a bankruptcy or IVA.
Catalog, store card, credit card, or loan debt that is not secured by property or another asset.
An application to vary payments under a CCJ when the debtor cannot afford agreed payments due to an unexpected situation.
A document issued that orders police to arrest an individual. The person may be granted bail and provided a court date or may be held in custody until being seen by a judge.
When a debtor has not paid a CCJ and a Variation Order has not been issued, a bailiff may acquire assets of the individual and use them to repay the debt.
An asset that an individual acquires while under a bankruptcy or IVA. This will be sold and used to repay debts.