Words we use

A

Adjudicator

The person who is employed by the Insolvency Service to assess your application for bankruptcy and make a decision on whether to approve it.

Administration Orders

An administration order is a court order which stops further action by creditors whilst you make payments to court. You will make a single payment every month into the court. The court staff will then divide the money amongst your creditors on a pro-rata basis.

Annual Percentage Rate (APR)

APR is a percentage that shows the total yearly cost of a loan including any fees that you will be charged and interest. This gives you a better idea of how much credit will cost than just looking at the interest that will be charged.

Arrears

Arrears are payments that you have missed on your debts and household bills. Arrears can also include interest and charges that have been added.

Assets

Assets are things like cash, savings or property that could be sold to raise money. Examples of assets include a car or home that you own.

Authorised push payment scam

This happens when someone is tricked into transferring money to a fraudster who is posing as a genuine payee. Payment is made by bank transfer, which is an electronic payment.

B

Bereavement Support Payment

Money you can get if your partner dies.

Bailiffs

Bailiffs are also commonly known as ‘enforcement agents’. They try to take your goods away and sell them, usually at auction, to raise money to pay the debt. They can only collect debts in limited situations. Private companies can only use bailiffs if they have a court judgment or order for the debt and you haven’t paid what the court said you should.

Balloon Payment

A larger than normal payment made at the end of some credit agreements.

Bankruptcy

Bankruptcy is a way of dealing with debts that you cannot pay. While you are bankrupt any assets that you have might be used to pay off your debts. After a period of time (usually one year) most of your outstanding debts are written off and you can make a fresh start.

Breathing Space

A government scheme which is designed to give you time to receive debt advice and find a solution to sort out your debt problems. Once you are in breathing space, all creditors who have been included will be told and they must stop any collection or enforcement activity.

Buildings and contents insurance

Buildings insurance protects the structure of your house or flat, contents insurance protects your possessions inside.

Buy-to-let mortgage

A mortgage to help you buy a property that you plan to rent out to other people, rather than to live in.

Charging Orders

A charging order is a court order which secures the debt against your home like a mortgage. This can only happen if the creditor has already got a court judgment or order for the debt.

Claimant

A person making a claim, for example, in a court case or for a state benefit.

Claims management companies

Claims management companies (CMCs) offer to make complaints about your financial agreements for you for a fee. You may be able to make a complaint yourself instead for free.

Claims Management Ombudsman

A free service that helps to resolve complaints about claims management companies. (Claims management companies handle complaints about your financial agreements for a fee.)

Collection order

A document that sets out what payments should be made on a fine.

County Court Judgment

A decision by the County Court. Usually this will be a money judgment that says you have to repay a certain amount of money by a given date, either in instalments or one go.

Credit agreements

A legally binding agreement where you either borrow money and pay it back later or are given goods but pay for these afterwards.

Credit reference file/credit report

A credit file includes information about your financial situation, including details about how much money you owe and whether you have been repaying this on time. This information can be used if you apply to borrow more money.

Credit reference agencies (CRAs)

A CRA is an independent organisation that produces and holds the information included in your credit reference file.

Creditor

A person, company or organisation that you owe money to.

D

Date of service

When a court document is received (or deemed to have been received) under the Civil Procedure Rules (CPR). You need to respond in a limited time to avoid further escaltion or enforcement action.

Debt Arrangement Scheme

The Debt Arrangement Scheme (DAS) is a legal scheme run by the Scottish Government. It will give you time to pay off your debts over a reasonable length of time through a debt payment programme. Whilst a debt payment programme is in place through DAS, all interest, fees and charges on your debt will be frozen. Creditors should not contact you during your debt payment programme.

Debt Collection Agency

A company that collects debts. A debt collection agency has no more power than the original creditor. They are not bailiffs and have no right to come into your home. Just deal with them in the same way that you would deal with a non-priority creditor.

Debt collection Agency (S)

A company that collects debts. A debt collection agency has no more power than the original creditor. They are not sheriff officers and have no right to come into your home. Just deal with them in the same way that you would deal with a non-priority creditor.

Debt Management Plan

You make affordable monthly payments to a debt management company which shares the payments among your creditors for you. Make sure you use a debt management company that does not charge you any fees for their services. Only non-priority debts can be included, and creditors don’t have to freeze interest and charges.

Debt Management Plan (S)

You make affordable monthly payments to a debt management company which shares the payments among your creditors for you. Make sure you use a debt management company that does not charge you any fees for their services. Only non-priority debts can be included, and creditors don’t have to freeze interest and charges. It will usually be better to apply for a debt payment programme under the Debt Arrangement Scheme.

Debt Relief Order

A DRO could be a good option if you have few assets and little spare income to deal with debts. You apply for a DRO with the help of a money adviser. The DRO stops any creditors included in the order from taking further action against you. After 12 months, your liability for debts included in the DRO is cleared.

Decree

A decree is a decision from a sheriff court. If the court decide you have to repay a sum of money, it may tell you to pay it in one go but might give you time to pay if you have asked for it.

Deficit

You have a deficit if the money you need to spend each month on living costs is higher than the money you receive each month from work, benefits or any other places.

Debt is secured on a property

This usually means that you have agreed to use a property that you own, such as your home, as security if you fall behind with payments on an agreement. Mortgage agreements that are used to buy a property are also secured against property. If you fall behind with payments on a loan or mortgage that is secured on a property you own, your property is at risk. The lender could start possession action.

Default Notice

Under the Consumer Credit Act 1974, if you break the terms of your credit agreement (such as by missing a payment) and your creditor wants to take certain kinds of action because of this, they first have to send you a default notice. The default notice should give you at least 14 days to pay the arrears. Paying the arrears will normally stop the creditor from taking any further action.

Defined benefit pension

A type of workplace pension which guarantees you a specific income for life.

Diligence

Diligence is the technical term for enforcement in Scottish law, it is the steps a creditor can take to get their money back after they have taken court action against you.

Direct earnings attachment

A deduction from your pay if you have received benefit overpayments from the Department for Work and Pensions (DWP).

Disposable capital

All your money assets, such as cash, bank savings, jewellery, antiques, stocks and shares, flats and properties.

E

Endowment mortgage

This is where you have an interest only mortgage and also pay towards an investment policy, such as an endowment policy. Your usual mortgage payments only repay the interest that is being charged on the amount you borrowed (the capital).  Although there is no guarantee, the endowment policy aims to provide you with the funds needed to repay the capital you owe before your mortgage ends.

Enforcement agents

Enforcement agents are also commonly known as ‘bailiffs’. They try to take your goods away and sell them, usually at auction, to raise money to pay the debt. They can only collect debts in limited situations. Private companies can only use bailiffs if they have a court judgment or order for the debt and you haven’t paid what the court said you should.

Equity

Equity is the difference between how much your home is worth and the total amount owed on any mortgage and other lending that you have secured on it. If your home is worth more than your mortgage and secured lending, there will be equity.

Equity release

A way for homeowners aged 55 and over to release money tied up in their home.

Equity Release Council (ERC)

A not-for-profit trade body that aims to provide you with information and protection if you are considering entering into an equity release scheme. If a firm provides or advises on equity release, being a member of the ERC will mean that they have to meet standards of conduct and practice designed to safeguard your interests.

Estate

An estate is everything owned by a person at the time of their death.

F

Financial Conduct Authority (FCA)

The regulator for financial services businesses in the UK. The FCA aims to protect consumers from harm caused by bad conduct in financial services.

Financial Ombudsman Service (FOS)

A free service that help settle complaints between consumers and financial services businesses.

First-tier Tribunal

If you believe a benefit decision about an alleged overpayment has been made incorrectly, you can appeal to the First-tier Tribunal.

Fixed penalty notice

Issued as an alternative to criminal prosecution for various offences, but criminal prosecution and a magistrates’ court fine can follow if a fixed penalty notice is not dealt with or paid within a limited/specified time.

Full and final settlement

When a lump sum of less than the total debt is accepted and the creditor agrees to write off the rest of the debt.

Funeral Expenses Payment

A payment to help you pay funeral costs if you get certain benefits.

G

Grace Period

An amount of time during which you will not be penalised for breaking some rules that usually apply. For example, in some car parks you may not be given a parking charge as long as you leave within 10 minutes of your parking time finishing even though you have really run out of time.

Guarantees

When you guarantee a credit agreement, this means that if the person whose name the agreement is in does not pay, the creditor can ask you to pay instead. The term ‘guarantor’ is used to describe someone who has signed a guarantee that they will pay if the person that borrowed the money does not.

Guarantor

A person that legally agrees to pay a debt if the borrower can’t pay.

H

High Court enforcement

If a creditor has a county court judgment against you, they may be able to enforce it in the High Court by taking control of goods. This is only possible if the debt is for £600 or more and is not regulated by the Consumer Credit Act 1974(CCA). ‘Taking control of goods’ involves High Court Enforcement Officers (HCEOs) instructing bailiffs to visit you and trying to either agree repayments with you or take your possessions.  There are different rules for stopping a bailiff being used for High Court enforcement compared to a County Court bailiff.

Hire-purchase (HP)

An agreement where you hire goods (for example, a car) for an agreed amount of time but are given the option to make a payment at the end of the agreement so you get to own the goods when it finishes.

Hire purchase companies

A company that lends you the asset you want (for example, a car) in return for regular payments but gives you the option to make a final payment so the asset becomes yours at the end of your agreement.

House of multiple occupation (HMO)

A house is an HMO if at least three tenants/contract-holders live there who create more than one household and the tenants/contract-holders share toilet, bathroom or kitchen facilities. 

I

Income tax

Income tax is a tax you pay on your income. You do not have to pay tax on all types of income.

Individual Voluntary Arrangement

A legal agreement that you will pay back as much of your debt as you can for an agreed amount of time. Afterwards, the remaining debts are written off. An IVA can be based on monthly payments, a lump sum payment, or both. It stops creditors included in the agreement from taking further action against you.

Information Commissioner’s Office

Provides information about your data protection and information rights. It can also deal with certain complaints, for example, if you are having a problem accessssing the personal information that an organisation holds about you.  

Insolvency

Legally binding debt solutions that can stop your creditors from chasing you for payments and can lead to some or all of your debts being written off.

Insolvency Practitioner

A qualified accountant or solicitor who specialises in insolvency law.

Insolvency Service

A government agency that administers debt relief orders and bankruptcies. This includes dealing with debt relief order and bankruptcy applications, and investigating the affairs of somebody that is bankrupt.

Interest

An extra amount you have to repay on top of any money you have borrowed.

Interest-only mortgage

A mortgage where your usual payments only repay the interest that is being charged on the amount you borrowed (the capital). You will also need to repay the capital you owe before your mortgage ends.

Interim charging order

When the creditor makes an application for a charging order, the court will firstly make an ‘interim charging order’ if it is satisfied that you own, or have a part share in the property. An interim order is not the final charging order.

J

Joint and Several Liability

Most joint credit agreements are ‘joint and several’. This means if you take out an agreement with another person, usually you are both responsible for the full debt, not just part of it. For example, if you take out a bank loan with a friend, the bank can ask just you, or just your friend, to pay the whole debt. Or, they can ask you both to pay towards the debt. This doesn’t mean that the debt is paid twice, just that you owe the full amount until the debt is paid.

L

Liability Order

This is a decision from a magistrates’ court that you owe money to certain government bodies. Used most often to collect council tax. Once a liability order has been made, further steps can be taken to collect the debt. For example, for council tax, money may be deducted from your benefits or wages, or a bailiff may be asked to collect the debt.

Lump sum

A single one-off payment, rather than instalments.

M

Mandatory reconsideration

If you disagree with a decision about benefits, tax credits or child maintenance you can ask for the decision to be looked at again.

MAP bankruptcy

‘Minimal Asset Process’(MAP) is the name given to a special type of bankruptcy in Scotland. You need to have a low level of debt and very few assets to use this process. If you qualify, MAP bankruptcy ends your liability for debts after a certain period of time, usually six months. If you are struggling to pay your debts, MAP bankruptcy can help you to make a fresh start.

MoneyHelper

The Money & Pensions Service’s consumer-facing service, providing free and impartial money and pensions guidance for people all across the UK.

N

National Insurance contributions (NICs)

The NICs that you pay help you to qualify for certain benefits and the State Pension. If you are employed or self-employed and your income or profit is above a set amount, usually you have to pay NICs. Employers also have to pay separate NICs for any employees whose income is above a set amount. 

Non-Priority Debts

These are debts owed to creditors who haven’t got any special powers to make you pay. For example, they can’t take back goods or stop you from getting an essential service. They can only ask you to pay or send the debt to a debt collection agency. As a last resort, they could make a county court claim. Debts such as unsecured loans, credit cards and overdrafts will normally be non-priorities.

O

Ofcom

The UK’s communications regulator.

Official receiver

An official employed by the Insolvency Service to deal with bankruptcies. Their role includes investigating the affairs of a bankrupt person and they may collect and sell assets to raise money for creditors. A person that is bankrupt has a legal duty to co-operate with the official receiver.

Overdraft

A facility available on many standard current accounts that allows you to withdraw money up to a specified limit even if there isn’t enough money in your account. You will be charged interest for using an arranged overdraft in most cases. If an overdraft is unarranged or unauthorised, charges will be higher.

P

Partial settlement

The partial payment of a debt in full and final settlement may appear as a partial settlement on a credit reference file.

Particulars of claim

A document used when a claim is raised in the court. It sets out the case for the claimant and gives information about the reasons for bringing the claim.

Payday loan

A payday loan is a type of cash loan, normally paid into your bank account. They are called payday loans as they are intended to be short-term loans, meant to be paid back when you next receive your wages or benefits.

Penalty charge notices

Penalty charge notices (PCNs) can be issued for certain parking and driving offences. They cannot be issued for parking offences on private land. If not paid in time, the debt can be recovered by a bailiff.

Pre-action protocol for debt claims

This is a set of court rules which describe the way you and the creditor are expected to behave, and the actions you should take, before a court claim for payment of a debt is started.

Priority Debts

The law gives different creditors different ways of getting their money back. Priority creditors have more power to get you to pay. This is why priority debts are more important than other debts. For example, money owed to your current gas and electricity supplier is a priority debt as they can cut off your supply in some circumstances.

Priority Services Register

A free UK wide service which provides extra advice and support to vulnerable fuel and water customers, including when there’s an interruption to their electricity, gas or water supply.

Protected goods

If you have paid a third or more of the total amount payable on a hire-purchase agreement, the goods become ‘protected goods’.

Public Health Funeral

A funeral paid for by the local authority, where the relatives are either unwilling or unable to pay.

R

Registered keeper

The person who is responsible for a vehicle and has the right to use it.

Repayment mortgage/Capital repayment mortgage

A mortgage where you pay off both the money that was lent to you (called the capital) and the interest charged by regular payments over an agreed term. Payments are usually made monthly. If you keep up to date with the repayments, the amount you owe should reduce each month and your mortgage will be fully repaid at the end of the term.

Right of set-off

A bank or building society can take money from an account you have with them to pay towards a debt that you owe them. This is called the ‘right of set-off’.

S

Safe Bank Account

This is an account with a bank or building society that you don’t owe any money to.

Secured Debt

A debt is secured if your agreement says that the lender can take away something you own if you do not pay. The most common type of secured debt is a mortgage, where the lender can repossess your home if you do not pay. Occasionally credit agreements may be secured on something other than your home.

Secure occupation contracts

You will usually have a secure occupation contract in Wales if your landlord is a community landlord, such as a local authority, a Registered Social Landlord (RSL) or a Private Registered Provider of Social Housing (PRPSH)

Sequestration

Also known as full administration bankruptcy. Bankruptcy ends your liability for debts after a certain period of time, usually one year. If you are struggling to pay your debts, bankruptcy can help you to make a fresh start. You cannot apply for bankruptcy without help from a money adviser.

Set aside

If you do not owe the money, you can ask the court to cancel the county court judgment (CCJ) or high court judgment. This is known as getting the judgment ‘set aside’.

Sheriff Court

Courts in Scotland that deal with civil cases such debt, breaches of contract and bankruptcy.

Sheriff Court decree

A decision given, often verbally, in a Sheriff Court in Scotland.

Statute Barred

This means that the law says that a creditor has run out of time to start a court claim to recover a debt. There may still be other things they can do to collect the debt, depending on why the money is owed.

Summary warrant

A type of court order used to collect certain types of unpaid debt (e.g. council tax).

Surplus Income (available surplus)

This is any money that is left over after you have budgeted for all of your living costs. Living costs do not include payments to arrears or credit debts.

T

Time order

A way of asking the court to give you more time to pay a Consumer Credit Act reguated credit agreement if you have fallen behind with the payments.

Token Payments

If you have little or nothing left to pay your creditors but can find the money to do so, offer a token payment of £1 a month to each creditor. Don’t worry that your offer is small or think that it is pointless. In our experience, your creditors want you to contact them and offer what you can actually afford to pay.

Trust deed

A trust deed involves making an offer to put your surplus income and your assets towards paying as much of your debts as possible for a set period, usually four years. Creditors who accept this offer agree not to enforce payment of the remainder of the debt that they are owed.

U

Undischarged bankrupt

A person that is currently bankrupt. Until they are discharged, the undischarged bankrupt still owes debt. They also have certain restrictions such as not being able to act as a limited company director or take out credit of £500 or more without telling the creditor they are bankrupt.

Unsecured Debt

If a debt is unsecured, your agreement does not give the creditor or lender any right to take away something you own if you do not pay the agreed payments.

V

Value Added Tax

A tax added to most products and services sold by VAT-registered businesses.

Variation

You can ask the County Court to vary the way in which it has told you to repay a CCJ. The court will decide if changing the payment is fair to both you and the creditor.

W

Warrant of Control

A court can issue a warrant of control in some circumstances. This authorises a bailiff to try to take control of your possessions to encourage you to pay a debt you owe. The bailiff should give you seven clear days’ notice that they are due to visit you. This is often called the ‘enforcement notice’. ‘Clear days’ do not include Sundays, Christmas Day or bank holidays. It may be possible to stop bailiff action.

Written off

A lender may consider writing off your debt if it seems unlikely that you will be able to pay.