Debt Help Glossary

Making debt easier to understand.

The following definitions are brief summaries and are only intended as a rough guide. For more help with the details, follow the relevant links in the text, or contact us for free professional no obligation debt advice.

Administration Order
An administration order is a court order placing a company that is, or is likely to become, insolvent under the control of an administrator following a petition by the company, its directors or a creditor. The purpose of the order is to preserve the company's business and assets to allow a reorganisation or ensure the most advantageous realisation of its assets whilst protecting it from action by its creditors.

Bankrupt
Someone against whom a bankruptcy order has been made and who has not been discharged from bankruptcy.

Bankruptcy Order
The court order which makes an individual bankrupt.

Charging Order
A court order placing restrictions on the disposal of certain assets, such as property or securities, given after judgement and provides priority of payment over other creditors.

Debt Consolidation
Debt consolidation is a process in which you restructure your debts into a single affordable amount. A consolidation loan can be used to help pay off your existing debts and simplify your repayments. A consolidation loan is usually secured against your property, so your home is at risk if you do not keep up monthly repayments. If you have a serious debt problem, a debt consolidation loan would probably make your situation worse.

Debt Management Plan
In a debt management plan, you come to an informal arrangement with your creditors to renegotiate your repayments. A debt management plan is NOT a debt solution. You are required to pay every penny of your debt back to your creditors. The debt management company may charge very high fees and your creditors continue to apply interest and charges, so even though you are paying money each month your overall debt may not reduce.

Individual Voluntary Arrangement (IVA)
An IVA is a voluntary arrangement for an individual and is a procedure whereby the person comes to an agreement with their creditors as to how their debt will be discharged. Such a scheme requires the approval of the court and is under control of a supervisor and Insolvency Practitioner. For more details of the IVA and procedures, please see our IVA help and advice pages.

Insolvent
The word ‘Insolvent’ is largely misunderstood and scares a lot of people. They think that insolvency is the same a bankruptcy. It is not.
 
You are insolvent when you cannot afford to repay your bills. In other words, if you have borrowed some money and you have contracted to pay an amount back each month, and you cannot afford to meet that payment you are technically insolvent: defined as “unable to meet your repayment obligations as they fall due”.

If you are paying pack minimum payments on your credit card because that is all you can afford then you could be insolvent.

If you are insolvent there are a number of insolvency solutions that legally become available to you; namely bankruptcy or an IVA. Both these solutions solve your debt problem by effectively writing off your unaffordable debt, though bankruptcy is a more extreme option than an IVA.

Insolvency Practitioner (IP)
An Insolvency Practitioner is a LEGALLY RECOGNISED FINANCIAL EXPERT; they are usually specialist Chartered Accountants or Lawyers. It is recognised in law that only a recognised Insolvency Practitioner can arrange for you to go through an insolvency procedure such as bankruptcy or an IVA agreement.

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.

IVA Nominee
The person chosen by an individual to report on the debtors proposals for an IVA. This will normally be an Insolvency Practitioner.

Proof of Debt
The document submitted in an insolvency to establish a creditors claim, it may be informal (by letter) or in a prescribed form for bankruptcy and compulsory liquidations.

Proxy
The authority given by a creditor or member to another person (proxy holder) to attend a meeting and speak and vote at a meeting on behalf of the creditor or member. In an IVA “creditors meeting”, creditors will often not attend in person but rather vote on the proposals by proxy.

Receivership
The general term applied when a person is appointed as a receiver or administrative receiver over certain assets.

Security
A charge or mortgage over assets taken to secure payment of a debt. If the debt is not paid, the lender has a right to sell the charge assets. The most common example is a mortgage over a property.

Statutory Demand
A formal notice requiring payment of a debt exceeding £750.00 within 21 days, in default of this demand bankruptcy or liquidation proceedings may be commenced without further notice.

If you need any more information on any of these or other terms, contact Debt1 today.