There are many different terms and phrases that exist in the debt world, and some can be more confusing than others. That’s why we have created our jargon buster, to help you make better sense out of them should you come across them!
Annual percentage rate (APR) is how interest is shown, and it tells you how much the interest would increase the debt in a year. E.g. an APR of 100% would be your debt would double in a year. The higher the percentage, the more expensive it is to borrow.
This is the term which is used when you do not meet the contractual payments to your household bills for example mortgage, rent or council tax etc. You can also be in arrears if you don't keep up your payments to any unsecured debts. Failing to keep up payments will result in arrears accumulating and you will need to pay an additional amount as well as your contractual payment until the arrears are settled.
An asset is something you own that can be sold to raise money, for example property or shares.
Attachement of Benefits (AOB)
This means deductions could possibly be taken from your benefits if you fail to keep up repayments after a County Court Judgement (CCJ) has been issued by the court. The attachments of benefits will cease once the debt has been paid.
Attachement of Earnings (AOE)
When you fail to pay a creditor, even after having been ordered to do so through a county court judgement, the creditor will then go back to the court to get money taken directly from your wages. The amount deducted from your wages will be decided by the court.
If you do not pay a CCJ once it has been granted then the company can use bailiffs to enter your home to remove goods to cover your debt and these items will be auctioned off.
This is a court order that you or your creditors can apply for. It has serious consequences. When you are declared bankrupt you have to hand over a lot of your possessions that can be sold, including your home, if owned wholly or jointly, to a trustee.
The Bankruptcy Order is the system by which debts which cannot be paid are processed.
If you default on a County Court Judgement then a charging order can be served. This allows the court to secure the debt on an asset for example, a house.
The first stage of civil action taken over arrears on mortgages, bank loans and utility bills. It may result in a County Court Judgement (CCJ). The court will often give an order to freeze interest and pay only what can be realistically afforded.
County Court Judgement (CCJ)
This is where a court awards a judgment as you have not kept up your payments to a debt and not made any attempt to reach an agreement with your creditor.
This shows your credit history including applications made for credit, this file is held with credit reference agencies. Your credit file can be damaged by defaults on your record.
A creditor is someone you owe money to.
Debt Collection Agency
These companies will be hired by creditors to pursue you for money owed. These companies do not have any additional powers so they can be treated like any other form of unsecured debt.
The person who is in debt.
Debt Management Plan (DMP)
A debt management plan is an informal agreement made with your creditors.
Debt Relief Order (DRO)
A route into Bankruptcy which is cheaper and easier than traditional bankruptcy. You must meet qualifying criteria for the DRO.
Failure to keep to the terms of a loan. A creditor will normally send a default notice if you have missed several payments.
A creditor will issue a default notice if you miss a payment and break the terms of your credit agreement. The notice will include details of the breach and how you can rectify this. The notice could include if there is any compensation and how long you have to rectify the matter.
This would be your children or any other person you care for that would rely on you for living requirements as they usually do not have their own source of income.
This is the amount of money you have left after you take away all your living expenses from your take home pay (income).
The amount of money left after you deduct your outstanding mortgage balance from the current house price.
Full and Final (F&F)
A full and final settlement means that you ask your creditors to let you pay a lump sum instead of the full balance you owe on the debt.
This is where a customer will pay for something but will not own it until after the payments have been made. This is most likely a car but it can be other items also.
Individual Voluntary Arrangment (IVA)
An IVA is a debt solution available to people who are insolvent. It is a formal agreement between a person and their creditors, in which the person agrees to pay a percentage of their debt back in affordable monthly payments, usually over a 5 year period.
When a person is not able to pay debts as and when they fall due or do not have enough available funds to pay all debts they are insolvent.
Insolvency Practitioner (IP)
This is an accountant who specialises in insolvency and have a licence to practice. This person must have the appropriate qualifications and be regulated to manage people in an insolvency situation.
Where more than one person has signed the credit agreement.
A debt in the name of more than one person – typically a mortgage held in a husband and wife’s name. Each named person is liable for the whole debt.
The magistrates court usually deals with non-payment of fines or maintenance orders etc. The court can make an order which will allow bailiffs to call and take away your possessions to be sold to clear your debts. It’s often worth taking professional advice from a solicitor or Insolvency Practitioner at this stage.
This is when the outstanding mortgage amount is more than the current market value.
The nominee is an Insolvency Practitioner (IP) who carries out the preparation of documentation to take it to the creditors for an IVA prior to being accepted. If accepted, typically the nominee will become the supervisor.
Proof of Debt Form
The form used by any of your creditors to make a claim for them to be included in an IVA or Bankruptcy and receive a percentage of the available income.
This is a creditor who is entitled to receive payments in priority to unsecured creditors, usually Crown departments such as Inland Revenue.
This is where a person can appoint another to attend a meeting and vote on their behalf.
This will happen if a creditor fails to recoup money from you then repossession is possible. The company will regain the item that has been sold to a debtor and this will be used for either full or part payment of a debt owed to them.
A Creditor who has specific rights over some or all of the Debtors assets. These are often the Priority Creditors.
This is where money is borrowed against any asset whether it is a home, vehicle or even furniture. If the terms of the contract is broken they could repossess the item(s).
A debt in one person’s name.
An Insolvency Practitioner (IP) who has been appointed to look after the IVA.
This is the person in an insolvency solution that takes control of your assets. This can be done by the official receiver or by an insolvency practitioner. The main duties include the disposal of any assets that you have and also the distribution of monies amongst all the creditors.
A Creditor who does not hold security.
These debts are not secured on any property or assets. Typical unsecured debts are credit cards, store cards, personal loans and catalogues etc.