APR: A measurement of interest that is applied to loans and other financial products.
Arrears: If you fall behind with the contractually agreed payments of any debt, such as a loan, mortgage or utility bill, then your account is considered to be in arrears.
Assets: Assets are items that you own with some form of monetary value. This could include your home or any other property, your car, any savings, stocks, shares or antiques.
Attachment of Earnings Order / Attachment of Benefits Order: If a creditor has obtained a court action against you and you fail to make the required payments, your creditor can seek to enforce the judgement with an Attachment of Earnings Order. This order instructs your employer to make deductions from your salary in order to pay the debt. Your employer sends the money directly to the court and they are entitled to charge an administration fee of £1 for every deduction to cover their costs.
An Attachment of Benefits Order works on a similar principle, deducting money from a debtor’s benefit entitlements.
Bankruptcy: Bankruptcy is a legal procedure in which the majority of an individual’s debts are written-off although the debtor will be forced to give up control of any assets that they may possess, including their home.
Bankruptcy Order: A Bankruptcy Order is the process of dealing with debts that cannot be paid. The official receiver is responsible for the administration of bankruptcies.
Bankruptcy Petition:A Bankruptcy Petition is a formal document, usually issued by the debtor himself/herself or by a creditor, and submitted to the court in order to obtain a Bankruptcy order.
Consumer Credit Act: The Consumer Credit Act 1974 is the act of parliament which regulates credit services in England and Wales. Various amendments have since been made to the act, most notably in 2006.
Credit Reference Agency: An agency who maintains and monitors records of individual financial histories. These agencies are often consulted by lenders to vet potential customers.
Credit Card: A form of payment that offers the holder regular access to a pre-agreed level of credit.
Creditor: A party (be it an individual, organisation or government body) that offers credit or services to a debtor. The creditor typically asks for repayment to be made at a later date.
Credit Union: A cooperative financial institution that is mutually owned and controlled by its members. They typically offer services to individuals with a “common bond”, such as the place in which they live, their job or even their religion. Credit Unions traditionally exist to promote responsible financial management and offer competitive products or services to those who may find it difficult to access mainstream services.
County Court Judgement: A County Court Judgement or is a judgement issued by the court in order for you to make payments towards any debt that you owe to a creditor. A court will make a judgement only when you have failed to keep to an original agreement with the lender and not made any attempts to come to an agreement for repayment. For more information, read our CCJ Guide.
Citizen’s Advice Bureau: Citizen’s Advice is a charity that offers free, independent advice on a wide range of issues including debt and financial matters.
Consumer Credit Counselling Service: Currently the largest debt charity in the UK. The CCCS exists to provide free, independent help and support to people in financial difficulty.
Debit Card: A card that allows the holder to withdraw money or to have the cost of purchases charged directly to a nominated bank account.
Debtor: A debtor is an individual or company that is in debt to another individual or company (the creditor).
Default:When scheduled or agreed repayments of a debt have been missed, it is known as a default.
Default Notice: A default notice is a formal letter that a lender sends to you when your account is so far in default that they consider your relationship with them has broken down. This is typically when an account is between three and six months in arrears and a record of this will be held on your credit file for six years.
Debt Management Plan: A plan or repayment schedule agreed with creditors for paying off your existing debts.
Equity: Equity is the difference between the market value of an asset, such as a property, compared to the amount of finance that is currently secured on it. If the total sum of any credit secured on a property (such as a mortgage) is higher than the value of the property itself, it is known as negative equity.
Final Discharge: A finial discharge is a formal document that indicates that you have completed a bankruptcy and that all debts have been cleared.
Guarantor: A guarantor is an individual or organisation that has ensured a creditor that a debt will be repaid. If the debtor fails to meet their obligations, the guarantor becomes liable for the debt.
Hire Purchase: An agreement whereby a company leases goods to a customer, with ownership of the goods passing to the customer at the end of the lease period.
Income Payments Order: During bankruptcy, a trustee could issue an Income Payments Order if he/she believes that the debtor can afford to make a regular contribution into the bankruptcy.
Informal Arrangement: An informal arrangement is whereby you agree an alteration to your repayment terms with your creditor without the assistance of a third party.
Insolvent / Insolvency: When a debtor does not have the finances sufficient to service their debt, they are considered to be insolvent.
Insolvency Practitioner: An individual who has recognised qualifications to deal with insolvency issues.
Interest: Interest is a percentage charge that is applied to the majority of loans, mortgages and other financial products. This is usually advertised as the APR or Annual Percentage Rate.
IVA (Individual Voluntary Arrangement): An Individual Voluntary Agreement is a formal arrangement between a debtor and his/her creditors relating to the repayment of debts totalling in excess of £15,000. It is widely considered as a more favourable alternative to bankruptcy.
Joint & Several Liabilities: When you take out a credit agreement, such as a loan or overdraft in partnership with another person (such as your partner) then you both become liable for the full amount of the debt. If one party fails to make their payments, any other persons named on the agreement are fully liable.
Lender: A person or company whom lends you money, usually a bank, building society or credit card company.
Liabilities Order: A liabilities order is issued if a council tax debt remains unpaid for a period of 28 days after the payment deadline. It is an application to the court that could allow the council to deduct payment from a debtor’s income or benefits. A liabilities order also enables the council to instruct bailiffs to remove property to the value of the debt or to declare you bankrupt.
Loan : A loan is an agreement between a borrower and a lender that allows the borrower to access a cash lump sum, to be repaid over an agreed period of time. Loans can either be unsecured, where the lender has no form of security in the event of non-payment, or secured against an asset. In this case, the borrower offers an asset, typically their home or car, as a guarantee against non-payment.
Order of Discharge: A court order that results in the discharging of a bankruptcy.
Property Restriction: During an IVA, a creditor may insist on a property restriction being placed on your home. This could require you to release some equity in your property at the end of the IVA term. Any property restriction would be noted by the Land Registry and would prevent you from selling your property whilst the IVA is in effect.
Proof of Debt Form: A form the creditor can submit to state their claim to any monies owed in an IVA or bankruptcy
Right to Offset: This can apply in situations where you hold a current account and a credit card or loan with the same lender.
Should your credit card or loan accounts fall into arrears, your bank can use funds from your current account to bring your debt repayments up to date. They do not need your authorisation to do this.
Repossession: Repossession refers to the process in which a lender regains possession of a property that was used as security by a borrower who has since defaulted on their debt.
Secured Debt: A secured debt is described as any form of borrowing, typically a loan or mortgage, in which the borrower offers an asset as some form of security, such as a property of car. In the event of a debtor defaulting, the lender may repossess that asset.
Statutory Demand: A statutory demand is a legal document that requires a debtor to pay an outstanding debt, either in instalments or as a lump sum, or to secure it against a property. The debtor has 21 days to pay or take any appropriate action, after which point a bankruptcy petition may be issued.
Time Orders: If you are suffering from temporary financial difficulty, a court may issue a time order. This allows them to make changes to your credit agreement which could, for example, result in reduced interest or monthly repayments.
Token Payment: When you are unable to service your debts in full, it may be necessary to make a reduced “token” monthly payment. This could be as little as £1 per month.
Trustee: The insolvency practitioner who will oversee an IVA, Trust Deed or bankruptcy.
Unsecured Loan / Debt: A loan or other form of credit that is not secured against any asset. In the event of a default, the lender has no form of security.
Variation Order: When a CCJ has been ordered but, due to unforeseen circumstance the debtor is unable to make the required payments, an application to vary the payments can be made.
Warrant of Execution: When debtors have failed to meet the payments required by a CCJ and no variation orders have been made a warrant of execution may be issued that enables bailiffs to enter a property and recover goods to the value of debt.
Windfalls: Any assets that the debtor acquires or inherits whilst in an IVA or bankruptcy will go towards repaying the debt.
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