A Useful Guide to Financial Terms
This guide gives you some financial terms in common use for finances and debts. For advice on all matters relating to debts, you can call our team free of charge for an individualised, personal consultation in complete confidence or simply apply online.
Add-On Interest
This is the common way interest is calculated. The rate of interest for the whole amount that you have borrowed is added onto the individual repayments each time.
Administration Order
An order from a county court which means the court will be responsible for the arrangement and administration of payments to your creditors. This is often at rates below those originally agreed with creditors.
Annulment
Legal term referring to cancellation agreements.
Arrears
Means a late payment of any kind.
Assets
Items which a person owns, which can in some circumstances, be legally used to repay the debts.
Bankruptcy
A legal process which can be instigated if someone finds themselves unable to meet debt repayments according to agreed time schedules. If a person decides it is best for them to enter bankruptcy (known as entering a petition of bankruptcy), this is termed a Voluntary Bankruptcy. If a creditor is the one entering the petition against the person, this is termed Involuntary Bankruptcy.
Benefits
Sometimes called ‘State Benefits’: periodic financial support from the Government. Examples of benefits include child benefit, disability living allowance, job seekers allowance, etc.
Binding
Often used in the phrase ‘legally binding’, this means that the condition or instruction it applies to simply must be kept.
Citizens Advice Bureau (CAB)
The CAB have a network of over 32,000 branches that are open to the public and offer free advice on a range of subjects including debt. You can find a link on our Useful Contacts Page.
County Court Judgement
Issued by the court when someone has broken a credit agreement without making any repayment offers. The order legally obliges the person to pay the debts.
Court Claim Form
A document which states a creditor has entered legal actions against you. You must respond within 14 days otherwise a County Court Judgement is automatically applied meaning you must repay the entire amount owed.
Creditor
A person or business owed money by another person or business that has become insolvent.
Credit Rating
A summary of the non-payment risk posed to a lender under credit agreements. It is arrived at by examining the potential borrowers known finances, previous history of payments, personal history and degree of individual liability for any previous debts.
DAS Approved Money Adviser
Approved by the Debt Agreement Scheme (DAS) in Scotland, they apply for a Debt Payment Programme on your behalf and handle many aspects of its administration.
Debt Consolidation
This is where multiple debts are serviced via one single monthly payment. It can be arranged as part of an Individual Voluntary Agreement (IVA), a bankruptcy, a debt consolidation plan or by taking out a loan/remortgaging.
Debt Management
If a person cannot repay there debts, Debt Management offers various methods by which that person can begin to regain some control over their finances.
Debt Management Plan
A Debt Management Plan is a professionally arranged agreement to repay monthly amounts to creditors. It is legally binding and typically used for debts that total £5,000 and over.
Debt Payment Plan (DPP)
Part of Scotland’s Debt Arrangement Scheme (DAS). A DPP provides a schedule to allow debt repayment over a longer timeframe than some other solutions.
Default Notice
Document from a creditor stating they are planning to take legal action to recover unpaid debts.
Demand
A formal written request from a creditor for money that is owed to them.
Diligence Stopper
Diligence refers to a Scottish court order to repay an overdue payment. A Diligence Stopper is an order preventing current enforcement or the filing of any new Diligences.
Earnings Arrestment
This is when amounts are deducted from your wages by your employer for distribution to your creditors.
Final Discharge
A document sent to someone at the end of their bankruptcy. This means that there are no more debts to pay and the bankruptcy is over.
Guarantee
A written agreement designed to enforce debt repayment.
Individual Voluntary Agreement (IVA)
Professionally arranged, legally binding agreement between a person in debt and their creditors, to repay fixed monthly amounts. Ideally, this should be an affordable amount, in order to complete the IVA over 5 years or more and have any debts covered by it written off at the end.
Insolvency Practitioner (IP)
A finance professional dealing with insolvency cases. IPs must be licensed and hold membership of a recognised professional body, plus insurance.
Insolvent
A person is classified as ‘insolvent’ when they can’t meet debt repayments due to insufficient income and/or assets.
Interest
Interest is an amount of money added to a person’s debts either a condition of the original loan or as a penalty for not adhering to the loans conditions. It is usually a percentage of the principal sum (the original amount) borrowed.
Joint Liability
Liability to repay a debt which is held by you and another party or parties. Where there are two parties a single claim can be made against each person. Debts incurred for which three or more people are responsible are pursued by a group claim, instead of separate claims against each individual involved.
Late Charge
A fee that lenders may make when a payment is late.
Levy
After a County Court Warrant is issued for a persons unpaid debts, a ’Levy’ gives bailiffs the right to to seek payment or seize certain items to clear that debt, subject to 7 days notice.
Liability
The obligation to repay money which has been borrowed.
Net Assets
The value of assets left after someone’s liabilities are deducted.
Nominee
A person who is authorised to facilitate an IVA application on behalf of a debtor, commonly an Insolvency Practitioners.
Official Receiver
A person who acts as the administrator of bankruptcy proceedings. Commonly they hold an interview with the person concerned and will make decisions as to which assets (if any) are to be sold to repay creditors. There are many Official Receivers in the UK.
Petition (Bankruptcy)
Formal application made to the court for a declaration of bankruptcy.
Protected Trust Deed (PTD)
Operational in Scotland and similar in nature to an IVA; it is a professionally arranged legally binding agreement between the debtor and creditors for a repayment schedule over 3 years or more.
Realise (Assets)
Selling items you own to raise money to repay debts in insolvency.
Secured versus Unsecured Creditors
Secured creditors have the power to require assets are sold to repay debts in insolvency cases; unsecured creditors do not have this option open to them.
Sequestration
A type of bankruptcy only available in Scotland.
Statement of Affairs
A document detailing your circumstances including income, assets, and debts.
Supervisor
An authorised person responsible for the ongoing administration of an IVA. This normally an Insolvency Practitioner.
Trust Deed
Legally binding professionally arranged agreement in Scotland involving the debtor releasing any assets for the benefit of creditors.
Trustee
Commonly an Insolvency Practitioner who administrates in bankruptcy proceedings by managing a trust deed involving surrendered assets.
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