Annual percentage rate (APR) is how interest is shown, and it tells you how much the interest would increase the debt in a year. For example, an APR of 100% would mean your debt would double in a year. The higher the percentage, the more expensive it is to borrow.
This is the term that is used when you do not meet the contractual payments for your bills — including your debts. Failing to keep up with 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, such as a property, vehicle or shares.
This means deductions could be taken from your benefits if you fail to keep up repayments after a County Court Judgement (CCJ) has been issued. The attachment of benefits will cease once the debt has been paid.
When you fail to pay a creditor, after having been ordered to do so through a County Court Judgement, the creditor can then go back to court to get money taken directly from your wages. The amount deducted from your wages will be decided by the court and is known as an Attachment of Earnings. This will continue until the debt has been paid in full.
If you do not pay a CCJ once it has been granted, then the company can use bailiffs to visit your home to remove goods to cover your debt, and these items will be auctioned off.
This is a formal insolvency solution that you or your creditors can apply for. Once the bankruptcy ends, all debts which were included are written off. Valuable assets may be sold to pay your creditors.
The bankruptcy order is granted by the court following a bankruptcy application, made by you or your creditors. Once the order has been made, you will be officially declared bankrupt.
If you default on a CCJ, then a final charging order can be served. This allows the court to secure the debt on an asset, for example, a house.
If you have not kept up your payments towards your debt and have not made any attempt to reach an agreement with your creditors, they can apply to the court for a formal judgment to decide on how you will pay back your creditors and any associated cost of the application. A CCJ will have a negative impact on your credit rating.
The County Court deals with civil (non-criminal) matters. These can include businesses attempting to recover money they are owed.
This shows your credit history, including applications made for credit. This file is held with credit-reference agencies and is updated by information provided by your creditors. On your credit file will be a credit score which is used by prospective lenders to assess the level of risk in lending money to you. Your credit score can be damaged by defaults on your record.
A creditor is someone you owe money to.
Debt management plans (DMPs) are informal debt solutions that can be used to help you pay back what you owe at an affordable rate. They allow you to reduce monthly payments towards your debts to one affordable amount by negotiating reduced rates with your creditors.
A Debt Relief Order (DRO) is a formal insolvency solution for dealing with your debts, which may enable you to get most of them written off.
It is suitable for those who owe £30,000 or less, who don’t own their own home, without much spare income and who don’t have many other assets or items of value.
The person who is in debt.
A default is a term that is used when you fail to make contractual payments towards a credit agreement and your creditors issue you with a default notice letter.
Early repayment charges, or redemption penalties, are sometimes paid to lenders if you clear the debt before the agreement has ended.
The methods for recovering a debt that has been sued for successfully and judgment entered against the debtors. Examples include instructing bailiffs, charging orders, attachment of earnings and Third Party Debt Orders.
The enforcement of judgment office or EJO are responsible for collecting unpaid court debts in Northern Ireland
A court notice that shows your bankruptcy has ended. This document will mean you’re debt free and the bankruptcy period is over.
The Financial Conduct Authority (FCA) is the financial services regulatory authority in the UK.
The independent body settling disputes between businesses providing financial services and their customers.
Putting undue pressure on a debtor, by using threatening behaviour. Repeatedly contacting people within a certain time period or acting illegally. You can complain about harassment by debt collectors and bailiffs.
The regional court which deals with civil claims involving sums of more than £50,000 and cases involving complex or important points of law.
A bailiff who executes High Court writs. There are only a few dozen HCEOs. Bailiffs who actually visit properties to collect payments are almost always private bailiffs appointed to act as agents of the HCEO.
A legal decision made by the High court.
Income tax is an amount you have to pay on everything you earn and any pensions or investments you’ve got.
An IVA is a formal insolvency solution where a legally binding agreement is made between you and your creditors to pay back your debts over a period of time.
When you’re insolvent, you can no longer pay your debts when they’re due (hence, you’re insolvent when filing for bankruptcy). Either an individual or a business can be said to be insolvent, but the term is most often used to refer to businesses.
An insolvency practitioner – sometimes abbreviated to IP – is someone who is licensed to act on behalf of companies and individuals when they are facing insolvency or acute financial distress. An IP is also able to help directors of solvent companies who have chosen to liquidate their company by way of a Members’ Voluntary Liquidation (MVL) in order to extract held profits.
When you borrow money or enter into a financial agreement with someone else, such as your partner, you take out a joint debt. There are different types of joint debts, such loans, credit agreements and bank accounts.
Joint liability denotes the obligation of two or more partners to pay back a debt or be responsible for satisfying a liability. A joint liability allows parties to share the risks associated with taking on debt and to protect themselves in the event of lawsuits. An individual subject to joint liability may be referred to as “jointly liable.”
Magistrates have sentencing powers that allow them to impose a range of sentences, including unlimited fines, bans, community orders and up to 12 months’ custody, depending on the offence.
Negative equity is when a house or flat is worth less than the mortgage you took out on it. If you’re in negative equity you could find it hard to move house or remortgage.
The Nominee is an Insolvency Practitioner who prepares the documentation required for an IVA before it is accepted. If accepted, the Nominee will typically become the Supervisor.
A preferred creditor, also known as a “preferential creditor”, is an individual or organisation that has priority in being paid the money it is owed if the debtor declares bankruptcy.
A Proof of Debt is the document that records a creditors claim in an insolvency. Without a Proof of Debt form being completed a creditor will not be recognised within the insolvent estate.
This is where a person can appoint another to attend a meeting and vote on their behalf.
If you have borrowed money against an asset and the creditor fails to recoup money from you, then repossession is possible. The company will regain the item, usually a vehicle or home, and this will be used for either full or partial payment of a debt owed to them.
A secured creditor is any creditor or lender associated with an issuance of a credit product that is backed by collateral. Secured credit products are backed by collateral. In the case of a secured loan, collateral refers to assets that are pledged as security for the repayment of that loan.
Secured debt is debt that will always be backed by collateral, which the lender has a lien on. It provides a lender with added security when lending out money.
A debt in one person’s name.
The term IVA Supervisor relates to the role played by the Insolvency Practitioner (IP), once the IVA Creditors’ Meeting has been approved.
A trustee in bankruptcy is an insolvency practitioner (IP) tasked to deal with the complex situations that can arise when someone becomes insolvent. The trustee in bankruptcy effectively takes control of the assets of an insolvent person and distributes funds to creditors according to the law.
A creditor who does not hold security.
A loan is unsecured if it is not backed by any underlying assets. Examples of unsecured debt include credit cards, medical bills, utility bills, and other instances in which credit was given without any collateral requirement.
Money Helper has replaced the Money Advice Service and brings together the support and services of three government-backed financial guidance providers: the Money Advice Service, the Pensions Advisory Service and Pension Wise.