Glossary of Debt Terms

• Administration Orders

An Administration Order may apply if you have at least one County Court Judgment against you and total debts do not exceed £5,000. It allows a County Court to administer payments to all your creditors. One payment is made to the court and the court splits this between all creditors according to how much you owe. As long as an Order is in force, creditors cannot take further enforcement action and interest is stopped.

• Assignment

If a creditor sells the debt to another company, this is assignment and shouldnt be confused with a creditor passing the debt to a collection agency that acts on behalf of the creditor.

• Attachment of Benefits

Similar to Attachment of Earnings, if you fail to make the repayments once a county court judgment has been issued the council may take deductions from your benefit. They are made at the rate of 5% of the personal allowance for a single claimant aged 25 and above. The attachments of benfits will continue until the debt is discharged.

• Attachment of Earnings

If you fail to pay money as ordered in a County Court Judgement, the creditor can apply to the court to have money deducted from your wages. Deductions are made at the rate of payment decided by the court as reasonable. (Attachment of Earnings Orders for Council Tax are dealt with by the Magistrates Court under a different system).

• Bailiffs

Employed mainly by the Court to enter into your property and take goods to sell at auction to cover debt that you owe to a lender who has previously issued a CCJ to which you have failed to pay.

• Balloon payment

A lump sum payment on a hire purchase or conditional sale agreement once some monthly payments have been made.

• Bankruptcy

A legal procedure that writes off all debts (with a few exceptions). You or one of your creditors can petition for bankruptcy. The debt is usually discharged after two to three years. However, if there is any equity in a bankrupts home or other assets, they will usually be sold to repay debts.

1. Bankruptcy Chapter 7

   In a Chapter 7 agreement, the court resolves most debts by selling assets and property so that the filer is given a fresh financial start. The court takes all assets including cars, homes, furnishings, jewelry or anything else of value. The assets are sold to pay off the debt. There are some debts that a person may wish to repay on their own instead of having the court resolve it. This is called reaffirmation. Reaffirmation is a special payment plan with the court. For example, if a car loan is reaffirmed, the person keeps the car and makes payments under new terms. Chapter 7 bankruptcy will not eliminate debts due to taxes, child support, alimony, student loans, court fines or personal injury caused by driving drunk or under the influence of drugs. A Chapter 7 filing will remain on a credit report for 10 years.
   
   

2. Bankruptcy Chapter 13

   In a Chapter 13 agreement, the court creates a debt repayment plan that allows the filer to keep their property. In order to file Chapter 13, a person must have a source of income and promise to pay part of their income to creditors. The court allows the filer to keep any assets that have debts against them if they pay them off under terms determined by the court. A Chapter 13 filing will remain on a credit report for 10 years. With Chapter 13, there is a better chance of obtaining future loans and credit.

• 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

• Charge for Payment

A document served in Scotland, where the debtor has been ordered to pay an outstanding debt within a given timescale. Similar to a County Court Judgement in England and Wales.

• Charging orders

The Charging Orders Act 1979 allows creditors with a high court judgemnet or county court judgment the ability to secure the debt to assets. A charging order cant be made unless payments have been defaulted during the CCJ.

• Company Voluntary Arrangement

This is the equivalent to an Individual Voluntary Arrangement, but for businesses. Allowing any financial problems to be overcome with the creditors consent so that the business can continue to trade.

• County Court Judgment

A judgement issued by the court in order for you to make payments to a debt you owe when you have failed to keep to an original agreement with the lender and not made any attempts to come to an agreement of repayment.

• Court Claim Form

Formal document sent to inform you that a creditor has begun legal proceedings against you. You are given 14 days to respond to the form. Ignoring the claim will result in a Judgment being registered by default and an order to pay the whole amount immediately.

• Credit file

A file held by authorised companies with financial history regarding credit applications and credit you have borrowed.

• Creditors

A person or company whom lends you money (usually a bank, building society or credit card company).

• 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.

• Dependent

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

• Distress

This is the right for any one whom rent is payable to sell debtors goods to contribute to the rent arrears.

• Earnings Arrestment

The Scottish equivalent to an Attachment of Earnings Order. Where the court can order monies to be deducted from the debtors wages to repaying an outstanding debt.

• Ex parte (also known as 'without attendance')

This is a term used when applications are made to court without anyone attending in person.

• Final discharge

A finial 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.

• Fraud

Deliberately deceiving someone with false information about yourself in order to gain an advantage.

• Guarantees

When a person has assured the creditor that the debtor will make the repayments. If the debtor fails to make the payments the guarantee will be liable for them.

• Hire Purchase

The pre-agreed purchase of an asset where the asset is in your possession as long as repayments are kept to. Once full payment is made the asset becomes the property of the consumer.

• Income Payments Order

In Bankruptcy, the Official Receiver or Trustee can apply for an Income Payments 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 creditors.

• Informal Arrangement

This is the simple term for arranging reduced payments to your creditors without the assistance of a third party.

• Insolvency

Having insufficient funds to meet all debts, or being unable to pay debts as and when they fall due.

• Insolvency practitioner

A person who specialises in insolvency, they are recognised by the appropriate board and are fully qualified to deal with your insolvency.

• Joint & Several Liability

When you take out a credit agreement, such as a loan or overdraft in joint names (with another person) then you are both liable for the full amount of any debt. (Credit cards are not normally in joint names, although you may have two cards, only one person with be the account holder).

This means that if one of you fails to repay the debt (this can occur following divorce or separation) then the creditor could still ask you for payment of the full amount (you are not just responsible for your "half" of the debt).

• Lender

A person or company whom lends you money (usually a bank, building society or credit card company).

• Levy

When the bailiff retrieves payment or goods to raise the sum on the warrant and costs. Notice of this comes 7 days before the bailiffs arrive.

• Liabilities orders

This order follows no payment of council tax 28 days after due date, a court summons is issued and not paid within the time a liability order is issued. It allows authorities to make arrangement for the arrears to be paid by deducting it at source, from wages or benefits.

• Liquidation (also known as "winding-up")

When a business/company is terminated or made bankrupt, all company assets are sold off and the proceeds go to pay the creditors. Any remaining money is distributed between the shareholders.

• Official Receiver (or Trustee in Bankruptcy)

The Official Receiver (or Trustee in Bankruptcy) deals with the administration for the bankrupts. They will normally carry out an interview of the bankrupt and it is ultimately their decision as to whether assets should be sold for the creditors benefit.

• Proof of debt form

A form the creditor can submit to state their claim in an IVA or bankruptcy.

• Property restriction

During an IVA a creditor may put a restriction on your property. Usually the restriction will only apply during the time of the arrangement.

• Pro-Rata

This means "in proportion to."

For example, if you owe Barclaycard £100, HSBC £900 and have £100 to pay them each month, the pro-rata payment to Barclaycard would be £10 per month and £90 per month to HSBC.

• Proxy

Creditors rarely attend creditors meeting; they assign a proxy to attend and vote on their behalf.

• Right to Off-Set

When you have fallen into arrears with payments to a credit card or loan and you also hold a current account with the same company, they can use the "Right to Off-Set" to take funds from your current account (without your permission!) to bring the debt back up-to-date.

• Secured Debt

Money borrowed that is secured on an asset, i.e. house, car or furniture, if terms of payment are not kept to, the lender may demand the monies back by the sale or return of the asset that money was secured on.

• Surplus Income (Available Surplus)

This is the amount you are left with if you subtract all your living expenses (housing costs, food, travel, clothing insurances etc.) from your incomes (wages, pensions, benefits etc). This is the amount of "surplus income" available for the creditors.

• Time orders

Permits the court to make changes to the consumer credit agreement, very useful if the creditor won't freeze interest or agree to the payments.

• Token Payments

When you are unable to make repayments to your creditors, it may be necessary to make small "token payments" to each creditor. This may be as little as £1.00 each per month, but it is better to send this "token payment" than send nothing at all.

• 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. For example, if the debtor had sold a property to a friend for £1.00 and then attempted to go bankrupt 8 years later, with the hope of regaining the property once the bankruptcy had been discharged, the OR can apply to have the property sold and any equity realised for the benefit of the creditors. This is known as a "Transaction at an Undervalue".

• Trustee

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

• Unsecured Debt

Refers to a loan, credit card, store card or catalogue where monies are not secured on any asset or property.

• Variation orders

When a CCJ has been ordered but due to unforeseen circumstance the debtor can't pay it, an application to vary the payments can be done by using the form N245

• Warrant of Arrest

If a Warrant of Arrest is issued, then the police are sent to arrest the person and can either hold them in custody until they can be brought before a judge or they can be granted bail and given a date when they must attend the court.

• Warrant of execution

When debtors have failed to pay the CCJ and no variation orders have been made, bailiffs can go to property and acquire goods to the value of debt

• Windfalls

Any assets that come about during an IVA or bankruptcy will go towards repaying the debt.

• Unsecured Debt

Refers to a loan, credit card, store card or catalogue where monies are not secured on any asset or property.