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Debt Glossary

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The Voluntary Relinquishment of ownership by failure to use the property, coupled with intent to abandon.

Add on Interest

A method of charging interest. Interest is calculated on the total amount borrowed and added to the principal. Each payment is deducted from this amount.

Administration Order

An Administration Order is a county court order that covers your debts. Your debts are put together and treated as one payment. This single payment is paid every month into the court. The court divides the money out and pays it to your creditors on a pro-rata basis. An Administration Order stops creditors from taking further action against you.

In relation to IVA's and Insolvency an Annulment is the cancellation of a bankruptcy order, by the court. The court aims to put an individual into a position whereby it is as if the order had never been made.


Arrears is a legal term for a type of debt which is overdue after missing an expected payment.


The yearly interest added to a loan/credit card/debt.


Assets are anything that has a monetary value. i.e. property, car, shares etc.


When a creditor sells a debt to another company. This is not to be confused with a creditor passing the debt to a collection agency to act on their behalf.

Attachment of Benefits

This is similar to an Attachement of Earnings. If you fail to make repayments of your debts once a county court judgement has been issued, the council may take the deductions from your benefits. These are normally made at a rate of 5% of the personal allowance for a single claimant aged 25 and above. The attachments of benefits usually continues until the debt is discharged.

Attachment of Earnings

If you fail to pay debts from a CCJ the creditor can apply to have money deducted from your wages. The rate of payment will be deduced by what the court sees reasonable.

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A person who acts on behalf of any other person/establishment in the repossession or seizure of property or assets to cover debts.

Balloon Payment

This is a final lump sum payment terminating a debt once some monthly payments have been made. i.e. loan, hire purchase.


A legal procedure that enables you to write off all your debt, due to the inability to pay them back.

Bankruptcy Order

A court order making an individual bankrupt.

Bankruptcy Petition

A request made, (by a creditor, or by the individual) to the court, to make a Bankruptcy order.

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Certificate of Satisfaction

This is a certificate produced by the court as proof that the likes of a CCJ or Attachement of earnings has been paid.

Charge for Payment (Scotland)

A legal document demanding payment of a debt (similar to a CCJ in England and Wales). The charge follows upon Decree. A Sheriff Officer usually serves it, and the debtor is required to comply with the order within a specified time (usually 14 days).

Charging Orders

A Charging Order is an order, made by the court, which gives the Trustee (of the order) a legal charge upon the debtor's interest in his/her home. The charge once made absolute continues even after a debtor is discharged from bankruptcy. A charging order cannot occur whilst in an IVA, as you are protected by the law.

Company Voluntary Arrangement (CVA)

Like an IVA, but for a Company. It allows the company to continue to trade whilst overcoming their problems with their debts.

Contractual Payments

These are your monthly credit commitments; the payments you agreed to pay each month when you signed your credit agreement. Failing to make the contractual payments can lead to arrears, which can affect your credit rating.

County Court Claim

This is a formal document which lets you know that a creditor has begun legal proceedings against you. A response has to be made within 14 days. Ignoring the claim results in a judgement being registered by default and an order to pay the whole amount immediately.

County Court Judgement (CCJ)

This is a judgement issued by the court because of a failed agreement to pay your contractual payments with no attempts to come to an agreement of repayment.

Credit File

This is a file held by authorised companies with your financial history regarding your borrowed credit and any credit applications.


A person or company who lends you money which you agree to pay back. i.e. a bank, building society, credit card company.

Creditors Meeting
This is where your creditors can vote in person or by proxy on whether to accept or reject the proposals of an IVA.

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Debt Collection Agency

A company that can chase up outstanding debt on behalf of a creditor. Not to be confused with Bailiffs. They have less power to collect the debt and should be treated the same as any other unsecured creditor.

Debt Management Plan (DMP)

A Debt Management Plan is an informal agreement between you and your creditors that enables you to repay your debts at a rate you can afford. You can manage this yourself or a company can arrange and handle your Debt Management Plan on your behalf.


Someone that is in debt and is required to repay their Creditors.

Default Notice

A notice issued by a creditor when a financial agreement fails because the arrangement has not been upheld. A default notice is when the lender is informing you that they are intending to take steps to recover the monies you owe them.


If your income is less than your expenditure i.e. you are spending more than you are bringing in, this is a deficit. The way out of this is normally to try and reduce your outgoings and/or increasing your income wherever possible.


Someone who depends on others for their living requirements and have no income of their own. i.e. Children and homemakers.


Discharge means freed from bankruptcy.


This is the right for anyone whom rent is payable to, to sell the debtors goods to contribute to rent arrears.

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Earnings Arrestment (Scotland)

The Scottish Equivalent to an Attachment of Earnings order. The court can order monies to be deducted from the debtors wages to repay outstandig debts.


The difference of the value of a mortgage against a property's current market value. Depending on secured loans against the property and the market value, a house can also be in negative equity.

Ex Parte (also known as without attendance)
This is the term given to applications made to the Court without anyones attendance in person.

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A charge for services rendered.


The act of deceiving someone with false information in order to gain some sort of advantage.

Frozen Account

A bank account that is frozen and funds can not be withdrawn until a lien is satisfied or an ownership dispute is resolved.

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When a creditor is assured that a debtor will make their payments. If the agreement fails then the guarantee is liable with the debtor.

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Hire Purchase

An pre-purchase agreement of an asset where the asset is in your possession as long as the payments are made. When full payment is made the asset is your property.

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Income Payments Order

In Bankruptcy, the Official Receiver or Trustee can apply for this, if they feel the debtor can afford to make a regular contribution into the Bankruptcy. The payment would then be distributed between the creditors.

Income Tax

Tax applied to your income made up of incremental rates; the higher the income the higher the tax. Everyone is allowed to make a certain amount of income before any tax is payable. This is known as the 'personal allowance' and the amount increases with age.

Individual Voluntary Arrangement (IVA)

An IVA is a procedure whereby the person comes to an arrangement with their creditors in how their debt will be discharged. They normally pay back a portion of their debts that is affordable. An IVA requires the approval of the court and is under control of a supervisor and insolvency practitioner.

Informal Arrangement

A term for arranging reduced payments with your creditors without the assisstance of a third party to do it for you.


Having insufficient funds to meet your monthly credit committments and debts.

Insolvency Act 1986

The Insolvency Act 1986 is the statutory legislation that provides the legal platform for all matters relating to personal and corporate insolvency in the UK.

Insolvency Practitioner

A person who deals is recognised by an appropriate board and is fully qualified in matters of Insolvency.


The fee charged to a debtor for borrowing money from a lender

Interest Rate

The percentage rate at which interest is charged on a loan or paid on savings etc

Interim Order

An individual who intends to propose a voluntary arrangement, such as an IVA to his creditors, may apply to the court for an interim order which if granted, halts bankruptcy and other legal proceedings whilst the order is in force.

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Joint & Several Liability

Joint liability applies to joint credit agreements. If you are in a joint agreement, you are both liable for the full amount of debt. If one of the joint parties fails to pay their debt (i.e. death, divorce, separation) then the creditor can hold the remaining party fully liable for the full amount of the debt. You are not just responsible for a portion of the debt.


A judge is a public official who hears and decides on cases brought before a court of law.

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Legal Charge

A legal charge is a form of security to ensure payment of a debt.


When a Bailiff retrieves payment or goods to raise the sum on the warrant and cost. Notice of this comes 7 days before the Bailiffs arrive.

Liabilities Orders

When a debtor fails to make payment of council tax after 28 days from the due date, a court summons is issued. If this is not paid within the specified timeframe a Liability Order is issued. This allows authorities to make arrangements for the arrears to be paid by deducting it at source, from wages or benefits.

Liquidation (also known as "winding-up")

Liquidation refers to the process by which a company (or part of a company) is terminated/made bankrupt, and the assets and property of the company is redistributed to the creditors. Any remaining money is distributed to the shareholders.

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The nominee is the person chosen by the individual to report on the debtors proposals for an IVA. This will normally be the insolvency practitioner.

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Official Receiver (or Trustee in Bankruptcy)

The person that deals with the administration for a Bankrupt.

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Preferential Creditor

A Creditor who is entitled to receive certain payments in priority to other unsecured creditors. These creditors include occupational pension schemes and employees.

Proof of Debt

A proof of debt is a statutory form, completed by a creditor, which states how much that creditor is owed. The form is supplied by the appointed insolvency practitioner who is taking care of the IVA or Bankrupcty.

Property Restriction

During an IVA arrangmenet a creditor may put a restriction on your property. This usually only applies during the time of the arrangement.


This means "in proportion to". For example if you owe a creditor £1000 and another creditor £4000. And you could only pay £250 per month. Then £50 and £200 would be paid to the creditors respectively.


Creditors rarely attend creditors meetings; they assign a "Proxy" to attend who would vote on their behalf.

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Realising an asset means selling it or disposing of it to raise money, for example in an IVA you may be required to sell an asset and obtain the money to contribute to your payments.

Right to Off-Set

When you have fallen into arrears with payments to a credit card or loan and you have a current account with the same company or bank, they can take funds from your account (without your permission) to bring the debt back up to date. This is know as "The Right to Off-Set".

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Secured Creditor

A secured creditor is a creditor who holds security, such as a mortgage or legal charge, has rights superior to those of an unsecured creditor providing that the security held is valid. If a creditor has any doubts concerning the validity of his security, immediate legal advice should be obtained. Secured debts cannot be entered into an IVA.

Statement of Affairs

A Statement of Affairs is a document sworn under oath and completed by the debtor or by a company representative which details the assets and liabilities of the legal entity concerned when it becomes insolvent. The offence of perjury is committed if the statement of affairs is deliberately misleading or erroneous. This is completed before an IVA begins.

Statutory Demand

This is a legal document that requires the debtor to pay an outstanding debt in installments or as a lump sum. Or it can be secured against a property.


The Supervisor is the person appointed to supervise the implementation of a debtor's, company's or partner's proposals for an IVA, CVA or PVA once approved by creditors (and members).

Surplus Income (Available Surplus)

This is the amount of money you are left with after you have subtracted your living expenses from your monthly income. This would be the amount of money you would have left to pay your creditors.

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Time Orders

These permit the court to make changes to the consumer credit agreement; things such as freezing interest or agreeing to payments.

Token Payments

When you are unable to make repayments to your creditors, it may be very beneficial and necessary to make small "token payments" to them. This could be as little as £1 a month but is better than nothing at all. It shows you have some kind of commitment to your creditors.

Transactions at an Undervalue

If, prior to Bankruptcy Proceedings a debtor attempts to transfer or sell an asset (up to 10 years before) in order to have it excluded from the Bankruptcy, the Official Receiver can apply to the Court to examine and set aside these transactions if it seems that they were transferred for much less than the market value. If nothing was seemingly done in good faith the Official Reciever can apply to have the property sold and any equity realised for the benefit of the creditors. This is called a "Transaction at an Undervalue".

Trust Deed

Also, known as The Scottish IVA. The Debtor, who cannot afford to pay their debts, comes to an arrangement with their creditors in how their debt will be discharged. They normally pay back a portion of their debts that is affordable. A Trust Deed requires the approval of the court and is under control of a supervisor and Insolvency Practitioner.


This is the Official Receiver or Insolvency Practitioner who will take control of the selling of the assets during an IVA or Bankruptcy.

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Unsecured Debt

An unsecured debt is a loan, credit card, store card or catalogue where monies are not secured on any asset or property.

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Variation Orders

When a CCJ has been ordered but the debtor cannot pay it, an application to vary the payments can be done by using an N245 form.

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Warrant of execution

When a debtor has failed to pay their CCJ and no variation orders have been made, bailiffs can go to their property and acquire goods to the value of the debt.


Any assets that come about during an IVA or Bankruptcy will go towards repaying the debt.

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