Debt Resources > Debt Glossary

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DEBT GLOSSARY - A

Abandonment
To voluntarily surrender the ownership of property with the intention not to return

Add on Interest
Add on interest is a method of charging interest on the total amount borrowed from the lender. Interest is charged on the total debt which is a specific APR set by the lender.

Administration Order
Administration Orders is an order put in place by a County Court to repay debts to your creditors. It can protect you from your creditors. i.e. If you have £5,000 or less of debt to 2 or more creditors and at least one County Court Judgment against you, an Administration Order can be put in place by a court to repay the debt on a pro-rata basis. You would pay the court and the court would distribute the payment on your behalf.

Administration Order (Companies)
Company Administration Orders can be made by a court to take control of a company and to repay debts to their creditors.

Amortisation
Paying of debt in equal instalments. This includes paying off the debt as well as the interest as apposed to just the interest alone. Like on an ‘interest only’ mortgage.

Annual Percentage Rate (APR)
APR is the yearly interest charged on a loan, Credit Card or any other form of debt.

APR
APR stand for Annual Percentage Rate. It is a way of measuring the interest rate applied to loans, credit cards and other financial products.

Arrears
A payment made after it is due is classed as being in arrears. If you fall behind with the contractually agreed payments of any debt, such as a loan or credit card, utility bill or mortgage, then your account is considered to be in arrears.

Arrestment
Arrestment is money or goods which are being held by a third party. This can also be classed as ‘Frozen’. The most common example would be your bank account. The bank would issue an ‘Arrestment’ on your funds.

Asset
An asset is property that belongs to an individual. Including; real property (land or buildings) and personal property (e.g. cash, stocks and shares, or vehicles).

Attachment
Attachment means that if you owe money to someone, they could hold your goods as an ‘attachment’ until the debt is repaid.

Average life
The length of time that will pass before one-half of a debt obligation has been repaid to the lender.

Attachment of Benefits Order
An Attachment of Benefits Order works on a similar principle, deducting money from a debtor’s benefit entitlements.

Adverse Credit History
This is where a credit rating is often considered unsuitable to lenders and creditors, usually attracting higher interest rates or charges.

Administrative receiver
An Insolvency Practioner who is appointed to organise and collect any available debt on behalf of a creditor.

Administrative receivership
The term applied when an insolvency practitioner is appointed as an administrative receiver. The right of a debenture holder to appoint an administrative receiver has been restricted by the Enterprise Act 2002.

Administrator
The insolvency practitioner appointed by the court under an administration order or by a floating charge holder or by the company or its directors filing the requisite notice at court.

Annulment
Cancellation.

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DEBT GLOSSARY - B

A person appointed by a County Court to seize goods on behalf of a lender due to unpaid debts. These good once seized will be sold at auction to recover the debt owed.

Balance
The total sum of an account which is equal to the net credits and debits at that particular point in time.

Bankruptcy
Bankruptcy is a legal procedure which is taken place in order to write off an individual’s debt, although the debtor may be at risk from losing their assets such as their home and their car.

Bankrupt
A debtor that can no longer afford the repayments on their debts and has filed for Bankruptcy. The debtor is classed as legally insolvent.

Bankruptcy Order
The process of dealing with unpaid debts. An Official Receiver is responsible for all administration with regards to bankruptcies.

Bankruptcy Petition
A formal document usually issued to a County Court by a debtor themselves or by a creditor/lender in order to obtain a Bankruptcy Order.

Bankruptcy Restrictions Order
Also known as a BRO, a Bankruptcy Restrictions Order can be put in place in the process of an individual filing for bankruptcy if it is thought that the debtor is being dishonest with regards to their outstanding debts. A BRO can restrict your wages or your spending if thought necessary by the court and can last from 2 to 15 years.

Beneficial Loan
A loan made by an employer to an employee on who interest is either not charged or is less than the official rate. The difference between the interest charged and the official rate is taxable.

Beneficiary
The Person who is entitled to receive funds of property under the terms and provisions of a will, trust, insurance policy or security instrument. In connection with a mortgage loan the beneficiary is the lender.

Benefits
Benefits are paid to you by the state and include income support, child benefit, job seeker's allowance, disability benefit, housing benefit, and council tax benefit.

Budget
A set amount of money for you to live on a day to day basis. A budget would be derived from a income and expenditure assessment. Budget deficit The gap between your total amount allocated to the amount you bring in, i.e. Your income minus your expenditure.

Budget deficit
The gap between your total amount allocated to the amount you bring in, i.e. Your income minus your expenditure.  

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DEBT GLOSSARY - C

Cap rate
The rate used in order to discount the present value of a stream of future earnings.

CEO - Chief Executive Officer
A CEO is the person responsible for a company’s operations, usually the president or the chairman of the board.

Citizens Advice Bureau
Also known as the CAB, the Citizens Advice Bureau is a government funded charity where the public can obtain free information on all civil and legal matters. These can range from loans, rental arrears, employment, housing matters such as mortgage and rent arrears, legal matters, family matters, taxation and many other subjects. They can be found in most towns and cities across the UK.

Classified Property Tax
Tax on property which varies in rate depending on how much the property is used.

Company bankruptcy
If a company fails, like an individual, it can also file for bankruptcy. The company is said to be insolvent and it may be subject to liquidation, receivership or an administration 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.

Consumer Credit Counseling Service
Also known as the CCCS, the Consumer Credit Counseling Service is one of the largest debt charities in the UK which is funded by the creditors themselves.

Company Directors Disqualification Act 1986
An Act of Parliament, consolidation act on the disqualification of directors.

Compulsory liquidation
The placing of a company into liquidation after a petition to the court, usually by a creditor.

County Court Judgment
Also known as a CCJ, a County Court Judgment can be issued to an individual by a County Court to force you to make payments towards any debt that you owe to a creditor. A court will make a judgment only when you have failed to keep up repayments on your arrears. The court will decide on the monthly repayments which will based on an assessment of your income and expenditure.

Court-Appointed Receiver
A person not necessarily a licensed insolvency practitioner, appointed to take charge of assets usually where they are subject to some legal dispute. Not strictly an insolvency process, the procedure may be used other than for a limited company, e.g. to settle a partnership dispute.

Charging Order
An order put in place by a County Court on a debtor’s property for monies owed to a lender.

Credit Reference Agency
A company that holds financial information and history on individuals. The three main Credit Reference Agencies in the UK are Experian, Equifax and Call Credit.

Credit Card
A form of pre-payment offered by a creditor providing access to money on a pre-agreed limit.

Creditor
A party or company that offers credit or services or the loan of money to individuals. The creditor will ask for repayment at a later date.

Credit rating
The assessment of an individuals credit history and situation to see if they are worthy of being given access to credit.

Currency
Any form of money that is in public circulation within a country.

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DEBT GLOSSARY - D

Debt
Money owed to a third party such as a lending company or creditor.

Debt Capital
The capital rose through the issue of bonds.

Debt consolidation
The process of bringing together numerous debts into one regular payment, usually through a consolidation loan or financial help product such as an IVA (Individual Voluntary Arrangement) or Debt Management Plan.

Direct debit
An instruction you give to your bank or building society to make regular payments from your account to a specific company. Unlike a standing order you agree that the creditor can vary this amount each month.

Disclaimer
A statement made to free oneself from responsibility.

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
An individual or company that is in debt to another individual or company (the creditor or lender).

Debt Advice
Advice from financial help institutions or professionals with the aim of resolving financial problems related to owing money.

Debt Management Plan (DMP)
Also known as a DMP, a Debt Management Plan is an informal arrangement between a debtor and a creditor to repay the sum of debts owed under a different set of terms and conditions that were originally agreed at the beginning of the loan term.

Default
When an individual or company reneges on the original agreements between them and their creditors, usually when numerous repayments have been missed.

Default Notice
A letter sent from a lender to a debtor when you account goes into default, usually when numerous repayments have been missed. A Default Notice can be held on your account for up to six years.

Director
A person who conducts the affairs and/or operations of a company.

Disqualification
A person who has been banned from being involved in the management or directorship of a company for the period specified in the order (unless leave has been granted by the court).

Dividend
A sum distributed to unsecured creditors in an insolvency.

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DEBT GLOSSARY - E

Earnings
Revenues minus expenses and taxes. Also called income.

Earnings arrestment
A order made by a County Court to take money directly out of an individuals salary in order to repay monies which are owed to a creditor.

Endowment
A fund setup for an individual or company usually used to repay a large debt at the end of a specific period, i.e. a mortgage.

Entitlement
Benefits guaranteed to an individual, such as dividends for shareholders or government aid for those who qualify.

Equity
The difference between the market value of a product or asset compared to the amount of finance that is currently secured on it.

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DEBT GLOSSARY - F

Fee
A specific amount of money charge for services offered by a company or individual.

Final Salary
The basis of determining a person's pension entitlement in a final salary scheme and which normally refers to an occupational pension.

Final Discharge
A formal document issued by a County Court that indicates the completion of a Bankruptcy Order.

Fixed charge
A fixed charge is a form of security granted over specific assets. The debtor cannot sell the assets without the consent of the secured creditor or repaying the amount secured by the charge.

Flexible Mortgage Account
A combined mortgage and current account.

Floating charge
A form of security granted to a creditor over general assets of a company. The assets may change (e.g. stock) and the company can use the assets without the consent of the secured creditor until the charge becomes fixed. This occurs on the appointment of an administrative receiver, on the presentation of a winding-up petition or as otherwise provided for in the document creating the charge.

Frozen account
An account which has been temporarily suspended usually due to a dispute between a debtor and a creditor.

Full and Final Settlement
An offer to repay a percentage of the debt owed from a debtor to a creditor on the condition the creditor agrees to write off the remaining balance.

Funds
A pool of money normally set apart for a purpose, for example, a pension fund to provide pensions.

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DEBT GLOSSARY - G

Gold Card
A payment card provided by a lending company which usually offers a higher spending limit or additional advantages over a standard card. Individuals who hold a Gold Card usually must have a higher salary.

Grace period
The period in which a financial agreement remains in force even though it remains unpaid, usually thirty days.

Grant
Funding for a non-profit organization, usually for a specific project.

Gross Income
The total income for an individual or company before deductions, i.e. tax and insurance.

Guarantee
A commitment made by a person to be answerable for the debts or liabilities of another.

Guarantor
An individual, company or organisation that has ensured a creditor that a debt will be repaid. This does not necessarily have to be the debtor themselves; it could be a family member or another individual or company. If the debtor fails to repay the debt the Guarantor becomes liable.

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DEBT GLOSSARY - H

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DEBT GLOSSARY - I

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DEBT GLOSSARY - J

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DEBT GLOSSARY - K

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DEBT GLOSSARY - L

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DEBT GLOSSARY - M

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DEBT GLOSSARY - N

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DEBT GLOSSARY - O

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DEBT GLOSSARY - P

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DEBT GLOSSARY - Q

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DEBT GLOSSARY - R

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DEBT GLOSSARY - S

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DEBT GLOSSARY - T

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DEBT GLOSSARY - U

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DEBT GLOSSARY - V

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DEBT GLOSSARY - W

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DEBT GLOSSARY - X

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DEBT GLOSSARY - Y

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DEBT GLOSSARY - Z

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