At EmployeeDebtline we believe in keeping things simple. Inevitably
though, you will have come across some words and phrases that
need a little more explanation. We have tried to explain the
most common of these below.
Arrears
Arrears are payments you have been unable or unwilling to make,
and are usually referred to in terms of months. If you are two
months in arrears then you owe two months’ payments.
Assets
Assets are items you own that have monetary value, and would
include the equity in your property and car, stocks, shares,
antiques and savings etc.
Bailiff
Bailiffs are mainly employed by the Courts to enter into your
home and take goods to sell at auction, in order to recover
any debts you still owe. The equivalent for residents of Scotland
is called a Sheriff Officer.
Bankruptcy
Bankruptcy is a legal procedure for people with serious debt
problems. Your assets are usually sold off, including any property
you might own, and the money used to pay your creditors. Once
discharged however, all your debts are written off, subject
to a few exceptions. For more information see Bankruptcy.
Consumer Credit Act
The Consumer Credit Act regulates all forms of borrowing between
traders and individuals for amounts up to £25,000. Its
purpose is to protect you, and it requires all traders who lend
money to be licensed.
County Court Judgment
(CCJ)
A court order forcing you to make payments on a debt owed to
one of your creditors. A CCJ is also made public, appearing
on your credit file and affecting your ability to borrow money
in the future.
Credit File
A file held by authorised companies such as Equifax or Experian,
containing your financial history regarding credit applications
and any debt you might have, including how you’ve repaid
that debt. Creditors check this file when they are considering
lending you money.
Credit Rating
A record of how creditworthy you are. Credit reference agencies
maintain a Credit File on all individuals who have previously
had or applied for credit. This information is then used by
lenders to rate the risk of lending you money.
Creditor
A creditor is any person or company that lends you money –
usually a bank, building society or credit card company. So
if you’re in debt, your creditors are the ones you owe
money to.
Data Protection Act
(DPA)
The Data Protection Act regulates how your personal information
is used and protects you from any misuse of these details. It
also gives you the right to know what information is held about
you, and sets out rules to make sure that this information is
handled properly and not divulged to other people.
Debt Consolidation
Debt Consolidation gathers all of your existing debts into a
single loan, normally at a lower rate of interest, allowing
you to make one affordable payment each month. For more information
see Debt
Consolidation.
Debt Management Plan
A Debt Management Plan is an informal arrangement negotiated
with your creditors in order to reduce your monthly payments.
It does not reduce the overall amount of debt, but by spreading
your monthly payments over longer period of time, they can normally
be reduced to a more affordable amount. For more information
see Debt
Management Plans.
Debtor
A debtor is someone who is in debt, and owes money to another
person, company or organisation.
Decree
A Scottish court order forcing you to make payments on a debt
owed to one of your creditors. A Decree is also made public,
appearing on your credit file and affecting your ability to
borrow money in the future. It is the direct equivalent of a
County Court Judgment (CCJ).
Default Notice
A notice issued by a creditor when you fail to make payments
based on your original credit agreement. If you receive a default
notice, it doesn't automatically mean the creditor is going
to take legal action, but the default can appear on your credit
file for 6 years, making it difficult to borrow money in the
future.
Discharge
If you have been declared bankrupt, then discharge occurs when
the bankruptcy period ends. However, not all restrictions are
lifted upon discharge.
Equity
This is the difference between the value of the mortgage against
a property and its current market value. If the sum of all loans
secured on the property is greater than its market value, then
this is known as negative equity.
Guarantor
A Guarantor is somebody who makes a legally binding guarantee
to repay a debt if the original borrower fails to do so. Directors
often act as guarantors to banks in return for the banks giving
finance to their companies.
Individual Voluntary
Arrangement (IVA)
An IVA is an agreement between you and your creditors, with
very flexible terms. Typically, you pay an agreed monthly sum
for up to five years. This is then divided between your creditors,
who accept the sum in full and final settlement of the amount
you owe. You pay a percentage in the pound to your creditors
– the remaining balance is written off. For more information
see IVAs.
Informal Arrangement
This is the simple term for arranging reduced payments to your
creditors without the formalities of a contract. Such an arrangement
is not legally binding.
Insolvency
Having insufficient funds to meet all your debts, or being unable
to pay debts as and when they fall due.
Insolvency Practitioner
A person who specialises in insolvency and is fully qualified
to deal with your insolvency. They must also be licensed by
one of the chartered accountancy bodies, the Law Society, the
Insolvency Practitioners Association or the Department of Trade
and Industry.
Joint and Several Liability
When you take out a credit agreement such as a loan or overdraft
in joint names, then you are both liable for the full amount
of any debt. This means that if one of you fails to repay the
debt, the creditor could ask the other for payment of the full
amount – not just their "half".
Lender
Any person or company who lends you money – usually a
bank, building society or credit card company. Also referred
to as a creditor (see above).
Official Receiver
The Official Receiver is involved in every bankruptcy, and has
a duty to investigate your affairs and send a report to your
creditors. They also have to identify and protect your assets
prior to the appointment of a Trustee, who then sells them on
behalf of your creditors.
Protected Trust Deed
(PTD)
Protected Trust Deeds are the equivalent of IVAs
for residents of Scotland, the main difference being that they
last for a maximum of 3 years, instead of 5 years with an IVA.
All other aspects are almost identical, but for more information
you can either take a look at IVAs,
or contact
us now for immediate help.
Remortgage
If your property is worth more than the current outstanding
mortgage, you can normally release the additional money with
a remortgage, providing you with sufficient funds to pay off
all your other debts, and sometimes even give you an extra sum
of cash at the end. For more information see Remortgages.
Secured Debt
Refers to a loan that is secured against an asset, such as your
house or car. If the payment terms are not maintained, the creditor
may demand the monies back by the sale or return of the asset
itself.
Sequestration
Sequestration is the equivalent of bankruptcy
for residents of Scotland, except creditors can only make an
application to the court if at least £1,500 is owed rather
than the £750 minimum required for bankruptcy. Also, the
minimum period for sequestration is 3 years rather than just
1 year with bankruptcy.
Sheriff Officer
A Sheriff Officer is employed by the Courts in Scotland to enter
into your home and take goods to sell at auction, in order to
recover any debts you still owe. They are the direct equivalent
of a bailiff (see above).
Simple IVA (SIVA)
Simple Individual Voluntary Arrangements (SIVAs) are planned
to be introduced in 2008, and are intended to simplify the whole
IVA process. Currently an IVA can only be agreed if it is approved
by creditors representing 75% of the total debt owed. Under
the SIVA scheme this would be reduced to 51% for applicants
who owe in excess of £25,000. It also involves a simpler
application process and agreement. For more information see
IVAs.
Statutory Demand
A statutory demand is a legal document requiring you to pay
an outstanding debt in instalments or as a lump sum, or to secure
it against a property.
Supervisor
A Supervisor is the insolvency practitioner (see above) appointed
to oversee the implementation and running of your IVA proposals
once approved by creditors.
Trust Deed
Typically the shortened name used for Protected Trust Deeds
(PTDs), as described above. However, Trust Deed can also refer
to a version of a PTD which gives you no legal protection, so
always check which version you are dealing with. We suggest
you contact
us for specific advice on this product.
Trustee
A Trustee is appointed by your creditors during bankruptcy,
and is responsible for realising your assets and sharing the
monies out between them. In simple terms, this means they are
responsible for selling your possessions for as much money as
possible in order to pay off your creditors. In Scotland, a
Trustee also refers to the insolvency practitioner responsible
for the administration of a Protected Trust Deed.
Unsecured Debt
Refers to a loan, credit card, store card or catalogue where
the debt is not secured against any asset.
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