Creditfix Debt Glossary
Administration Order: A debt solution for those who have a County Court Judgement, or a High Court Judgement, against them and have less than £5000 of debt to at least 2 creditors. The order is granted by the local county court, and allows for debt payments to be consolidated into one payment made to the court who distributes it among the creditors.
Assignment: When a creditor sells a debt on to another company. This is different to hiring a debt collection agency to act on their behalf.
Arrears: A form of debt which arises from missed payments, such as to your household bills or to your unsecured debts. They can accumulate if payments are continually missed, and you will be expected to pay them back on top of your ongoing monthly payments.
Assets: Your belongings which have monetary value. This can include your house, your car, stocks, shares, and savings.
Attachment of Benefits: The council can have deductions taken from your benefits if you do not make repayments as part of a County Court Judgement. This is done at 5% of the personal allowance for a single claimant aged 25 and above.
Attachment of Earnings: Your creditors can apply to have any money owed to them as part of a County Court Judgement taken directly from your wages. The court decides the amount. The Scottish equivalent is an Earnings Arrestment
Bailiffs: Primarily hired by the Court, although may also work for other creditors, to acquire and sell your goods to fund your debts. You have rights when it comes to what they can and can’t do, such as entering your property. In Scotland, a similar role is played by Sheriff Officers.
Bankruptcy: A legal solution to your debts. All debts are written off, with some exception, but you lose control of your assets, which are likely to be sold to release equity to repay your debts. In Scotland, this is referred to a ‘Sequestration’.
Benefits: Payments from the state designed to aid people facing financial challenges, such as universal credit, income support, or jobseekers allowance. It is still possible to get help with your debts while on benefits, such as entering into an IVA. However, some options are restricted.
Certificate of Satisfaction: Official proof that a County Court Judgement, or Attachment of Earning has been paid, or completed. They are issued by the court for a fee of £10.
Charge for Payment: A document ordering a debtor to pay an outstanding debt within a specific period of time. This is relevant to Scottish Law. The equivalent in England and Wales is a County Court Judgement
Charging Orders: This allows creditors to secure a debtor’s debt to assets, should they have a high court judgement or county court judgement.
Company Voluntary Arrangement: A debt solution similar to an Individual Voluntary Arrangement, but for businesses.
Contractual Payments: Payments that are agreed between you and another party when you sign a credit agreement. Not meeting these payments leads to arrears, which can also affect your credit rating.
County Court Judgement (CCJ): A court judgement which orders a debtor to pay an outstanding debt after they have failed to keep to the original agreement. This is relevant to English and Welsh Law. In Scotland, a Charge for Payment document fulfils a similar function.
Court Claim Form: Issued to inform you that a creditor has begun legal proceedings against you. If you do not respond within 14 days, you will be required to pay the whole amount immediately.
Credit Report: A file detailing your credit applications and borrowing. It is held by authorised companies. This may also be known as a Credit File.
Credit Score: A representation of your creditworthiness based on your financial history. Lenders may use this to assess your ability to fulfil your financial commitments, and decide whether they want to lend to you. This may also be known as your Credit Rating.
Creditors: The people, or companies, who own your debt, such as a bank or credit card company.
Debt: Money that is owed to another person or company.
Debt Arrangement Scheme (DAS): A Scottish debt management scheme which allows you to apply for a Debt Payment Programme to pay off your debt.
Debt Collection Agency: An agency who may be employed by your creditor, or may buy your debt from your creditor, in order to pursue your debts. They are not Bailiffs so do not have more power than any other unsecured creditor, although they are likely to employ more direct and confrontational tactics.
Debt Consolidation Loan: The process of taking out a loan to pay off all, or a number of, debts. This would allow for your debts to be consolidated into one monthly payment.
Debt Management Plan (DMP): An informal debt solution which is not legally binding. Following negotiations with your creditors, you can agree on a debt management plan with lower repayments over a longer period of time. This may also be known as an ‘Informal Arrangement’.
Debt Payment Programme (DPP): A Scottish debt solution which allows you to pay one payment, which is shared amongst your creditors and can last for any reasonable length of time. It operates as part of the Debt Management Scheme.
Debt Relief Order (DRO): A debt solution for those who do not own their home, have less than £20,000 of unsecured debt and have less than £50 surplus income a month. Your debts are frozen for a year and, if your circumstances have not changed after a year, they are written off. This is available to those in England, Wales and Northern Ireland.
Debt Settlement Offers (DSO): Also known as a ‘Full and Final Settlement Offer’, this debt solution allows you to pay off your debts in one lump sum payment. You negotiate with your creditors to give them one large payment, in exchange for them writing off the remaining amount.
Debtor: Someone who is in debt
Deficit: A deficit occurs when what you spend is more than your income.
Earnings Arrestment: Your creditors can apply to have any money owed to them taken directly from your wages. The court decides the amount. The equivalent in England, Wales and Northern Ireland is an Attachment of Earnings Order.
Equity: The difference between the value of your mortgage and its current market value. Essentially, it is the profit you would make, were you to sell your home. Negative Equity occurs when the sum of the loans tied to your property is greater than the value of the home.
Final Discharge: This is sent to you to notify you that your Bankruptcy has ended and you are now free from debt.
Guarantor: A third party who formally vouches for the debtor. If the debtor does not make their payments, the Guarantor becomes liable for them.
Hire Purchase: An agreement to buy an asset that is in your possession through regular payment. Once the payment is complete, the asset becomes the property of the consumer.
Income Payments Order: An order which an Official Receiver or Trustee of a Bankruptcy can apply for which will allow the debtor to make regular contributions into their bankruptcy, which are then distributed amongst their creditors.
Individual Volunatary Arrangement (IVA): A formal insolvency agreement in England, Wales and Norther Ireland between you and your unsecured creditors. One regular repayment is made and divided between your creditors over a fixed period of time. In Scotland, it is possible to get a similar arrangement called a Trust Deed.
Insolvency: The process of having insufficient funds to pay off your debts.
Insolvency Practitioner: A qualified specialist in insolvency.
Joint and Several Liability: This may also be referred to as ‘Joint Debt’, and it refers to credit agreements which are taken out by two people. Under such agreements, both parties are responsible for the full amount, rather than half. This means that if one party fails to repay, the other party must still pay the full amount.
Liquidation: This is the process of selling a company’s assets when they are terminated, or go bankrupt. Creditors are paid, and then it is divided between the shareholders. It may also be known as ‘winding up’
Official Receiver: A person appointed by the court to manage the financial affairs of a business or person that has gone bankrupt. They may also be known as a ‘Trustee in Bankruptcy’.
Proof of Debt Form: A Form used by a creditor who wishes to state their claim in an IVA or Bankruptcy.
Pro-Rata: ‘in proportion to’. So paying £100 a month to your creditors ‘pro-rata’, will result in each of them getting an amount of that £100 in proportion to the amount that you owe them in total.
Proxy: A person who is attending to something in someone else’s place. Your creditors may assign a proxy to creditors meetings, to act on their behalf.
Right to Off-Set: If you have a current account with the same company you owe money to, they are able to take funds from the current account to bring the debt up-to-date. They can do this without your permission.
Secured Debt: Debt which is secured to an asset. This may be your house, a car, or some furniture. If payments are not made, creditors are able to demand the return of that asset.
Sequestration: A legal solution to your debts. All debts are written off, with some exception, but you lose control of your assets, which are likely to be sold to release equity to repay your debts. This is called Bankruptcy in England, Wales and Northern Ireland.
Sheriff Officers: Primarily hired by the Court, although may also work for other creditors, to acquire and sell your goods to fund your debts. You have rights when it comes to what they can and can’t do, such as entering your property. In England, Wales and Northern Ireland, Bailiffs have a similar role.
Statutory Demands: A legal document placing requirements on a debtor. This could be to pay the debt, either in instalments or in a lump sum, or to secure it against an asset.
Surplus Income: The remainder once you take your living expenses from your income. This is the amount that is usually made available to your creditors.
Transactions at an Undervalue: The sale of an asset for less than its market value, with the aim of avoiding its sale during bankruptcy. An Official Receiver can examine debtor’s finances up to 10 years prior to the bankruptcy to establish whether this has taken place.
Trust Deed: A formal insolvency agreement in Scotland between you and your unsecured creditors. One regular repayment is made and divided between your creditors over a fixed period of time. In England, Wales and Northern Ireland, it is possible to get a similar arrangement called an IVA.
Unsecured Debt: A debt which is not secured against an asset or property.
Variation Order: An order following an application using form N245 to vary County Court Judgement payments due to unforeseen circumstances.
Warrant of Execution: If a debtor has failed to pay a County Court Judgement, bailiffs are given this warrant which allows them to acquire goods from the property to sell to pay off the debt.