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Jargon Buster

Tuesday, 28th April 2009

Ever felt lost trying to understand all the terms used in the debt world? Our jargon buster should help you on your way!

Three types of Court

County Court

The first stage of civil action taken over arrears on mortgages, bank loans and utility bills. It may result in a Judgement (CCJ). The court will often give an order to freeze interest and pay only what can be realistically afforded.

Magistrates Court

Summons here are usually for non payment of fines or maintenance orders etc. The court can make an order which will allow bailiffs to call and take away your possessions to be sold to clear your debts. In these cases apply for a “time to pay order”. It’s often worth taking professional advice from a solicitor or Insolvency Practitioner at this stage.

High Court

Consult an Insolvency Practitioner immediately if a High Court summons is received – this is a very serious matter that requires a professional response.

Jargon Buster

Administration Order

For debts of less than £5,000 and one or more County Court Judgement, it may be possible to get an Administration Order. This provides for one regular payment directly to the court, who in turn shares it between the creditors.

Annulment

Cancellation.

Annual Percentage Rate (APR)

Interest rate for a whole year, rather than a monthly fee, applied on a loan such as a mortgage or credit card.

Assets

An asset is something you own that can be sold to raise money, for example property or shares.

Bailiff

A Court Officer whose role is to execute Warrants, Writs and Distraints.

Bankruptcy Order

A Court order making you bankrupt.

Bankruptcy Petition

A request made, by either you as the debtor or by a creditor, to the court to make you bankrupt and will include the reason why.

Bankruptcy

A trustee is appointed by the court to manage the bankrupt individual's estate. The trustee's prime duties are to take control of the assets and realise (i.e. sell) them to repay the creditors with whatever is available.

Charging Order

An order made by the court which gives a legal charge on a property. In a Bankruptcy this can remain on the property even after discharge.

County Court Judgement or "CCJ"

Issued by the Court requiring payment of debt within 28 days. Circulated to Credit Reference Agencies if this deadline is missed.

Creditors

People or organisations such as banks and credit card companies to whom money is owed.

Credit Reference Agencies

Are organisations who update your credit file so lenders can use to assess your likelihood of repaying.

Debtors

An individual who owes money.

Default

Failure to keep to the terms of a loan. A creditor will normally send a default notice if you have missed several payments.

Discharge

Free from bankruptcy

Distraint Order

Seizure of goods or property which may be sold to settle debts.

Estate

In a bankruptcy this is referred to as your assets or property which a Trustee can deal with to pay your creditors.

Individual Voluntary Arrangement or“IVA”

An alternative to bankruptcy whereby the insolvent individual enters into a binding agreement with their creditors to repay a proportion of the debt.

Insolvent

Being unable to pay debts when they are due.

Insolvency Practitioner

A person authorised and licensed to help and advise insolvent individuals and companies, usually an accountant or solicitor.

Joint Liability

A debt in the name of more than one person – typically a mortgage held in a husband and wife’s name. Each named person is liable for the whole debt.

Judgement

A Court’s formal recognition of a debt.

Legal Charge

This is a form of security (a mortgage) to ensure payment of a debt.

Negative Equity

When the size of the mortgage is larger than the value of the property on which it is secured.

Official Receiver

A Court officer responsible for overseeing the resolution of cases of insolvency.

Petition

The document which formally starts insolvency proceedings. Typically presented to the Court by the Creditors.

Plaintiff

A person or Company taking action who is owed money.

Preferential Creditor

A creditor who is entitled to receive payments in priority to unsecured creditors, usually Crown departments such as Inland Revenue.

Proxy

This is where a person can appoint another to attend a meeting and vote on their behalf, referred to as "a proxy".

Public Examination

In a case of Bankruptcy the Court may order that the individual be questioned in open court about his or her dealings, property and financial affairs.

Secured Creditor

A Creditor who has specific rights over some or all of the Debtors assets. These are often the Priority Creditors.

Security

A legal interest in assets held by the lender, providing them with effective ownership of the asset if the borrower defaults on payments. Typically, a mortgage on a house is held on this basis.

Sole Liability

A debt in one person’s name.

Statutory Demand

A formal notice requiring payment of a debt in excess of £750 within 21 days. If in default then Bankruptcy proceedings may be commenced without further notice.

Summons

A formal instruction requiring the recipient to appear before a Judge or Magistrate at court. There are three types of court involved in debt recovery.

Trustee

The Trustee in bankruptcy is either the Official Receiver or an Insolvency Practitioner who will take control of and sell your assets and where practicable make payment to your creditors.

Unsecured Creditor

A Creditor who does not hold security.

 

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