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Debt glossary

A definition of debt terms

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Not sure what a balloon payment is? Struggling to understand the difference between APR and AER? 

Use our debt glossary to find out what the most common debt terms mean.

 

A

Administration order

This is a type of payment plan, managed for you by the County Court. It may also be called an ‘admin order’ and makes your debt repayments more affordable.

In some cases, you can apply to have debts written off.

Annual Equivalent Rate (AER)

This is used to show what you would earn in interest on a savings account. Any interest is added to the balance in your savings account. The next interest payment is then based on the new balance.

Annual Percentage Rate (APR)

APR stands for the Annual Percentage Rate. This shows the amount of interest on a credit agreement, it takes into account all the charges made under the agreement. It will let you compare the cost of each deal and work out which is the best value for you. You can use it to compare one hire purchase agreement with another. But you shouldn't use it to compare different types of credit, such as a mortgage with a credit card as each one will have different terms.

Arrears

Arrears are another term for missed payments. If you miss one month’s payment to a household bill or debt you'll be in arrears by one month.

Arrestment

Arrestment is a method the Scottish courts can use to repay your debt. The courts freeze any bank accounts you've got and can use any money in that account to pay your debt.

Arrestment of earnings

Arrestment of earnings is a method the Scottish courts can use to repay a debt. Your employer will take money straight from your wage and pay it to the creditor.

Asset

An asset is something of value. This could be a house, a car or an antique.

Attachment

Attachment is a way of enforcing an unpaid court order. Sheriff officers will remove goods from outside your house. The goods will be sold and the money put towards your debt.

Attachment of benefits order

Attachment of benefits is a method the courts can use to repay a debt. The Department of Work and Pensions will take money from your benefits and pay it to the creditor.

Attachment of earnings order

Attachment of earnings is a method the courts can use to repay a debt. Your employer will take money straight from your wage and pay it to the creditor.

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B

Bailiffs

Bailiffs are officials who can take away someone’s goods. Creditors use bailiffs to collect outstanding debts. They can remove non-essential belongings from your property. They then sell your goods and put the money towards your debt. See Enforcement officers.

Bankruptcy

Bankruptcy is a the legal procedure where the courts write off debt that you can't pay back in a reasonable amount of time. If you've got any assets they will be sold to pay back your debt.

Beneficiary

A beneficiary is someone who is going to receive assets or profits from a trust, an estate or an insurance policy, when the conditions within the contract are met.

Bankruptcy restriction order (BRO)

A court order which will mean bankruptcy restrictions continue to apply for a period of between two and 15 years.

Bankruptcy restriction undertaking (BRU)

Is similar to a bankruptcy restrictions order, but without the need for a court hearing.

Balloon payment

A balloon payment is a one off, lump sum payment on a hire purchase or conditional sale agreement. They are normally made at the end of the agreement.

Basic bank account

Accounts designed for those with poor credit scores, especially people who have been insolvent. Most include a debit cards and some allow Direct Debits to be set up, but going overdrawn isn't allowed.

Beneficial interest

A share in an asset, often a property, that could be sold to raise money to repay debts.

Benefit over-payment

A benefit amount has been over-paid by Her Majesties Revenue & Customs (HMRC) and will need to be recovered.

Broker

A broker is a person, or organisation, who works on your behalf to find you the best deal when you buy things like insurance, mortgage, stocks or property.

Budget

A budget is a list of all the money you've got coming into your household (your income) and all the money you spend (your expenditure), each month. If you take your expenditure away from your income, it shows you if you've got a budget deficit or a budget surplus.

Budget deficit

When you're spending more money than you have coming in each month, you have a budget deficit.

Budget surplus

When you have money left over from your income once you have paid for all your costs, you have a budget surplus.

Budgeting

Budgeting is how you manage your income and spending to help you keep up-to-date with priority bills.

Buildings insurance

Buildings insurance contributes towards the cost of repairing or rebuilding a property if something happens to it, such as repairing flood damage.

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C

Capped rate

A capped rate is an interest rate or price that can vary but it will have a fixed amount that it won't go above. This often applies to products such as mortgages and energy bills.

Certificate of satisfaction

A document from the court as proof that a court order, such as a county court judgment, has been paid.

Charge for payment

A legal notice served in Scotland. It orders you to pay the debt in full within a certain period of time.

Charging order

This attaches an unsecured debt against a property or land and, in doing so, turns an unsecured debt into a secured debt. If you have a County Court judgment your creditor could apply for a charging order.

Child benefit

This is a regular tax-free benefit payment made to anyone who is responsible for a child or young person. In most cases it's paid until the child is 19, if they’re in full time education or training.

Child tax credit

This is a means-tested benefit for parents and carers of children and young people. In most cases it's paid until the child is 19, if they’re in full time education or training.

Company pension

A pension plan where you and your employer make a monthly contribution. The amount you pay is tax free. From October 2012 every employee will be automatically opted in to their employer’s pension plan.

This is used for arrears on a magistrates’ court fine and it should include the amount of the fine, what the payment terms are, where to pay and how to contact the fines officer.

Collection order

This is used for arrears on a Magistrates court fine and it should include the amount of the fine, what the payment terms are, where to pay and how to contact the fines officer.

Collections process

Collective term for the various stages a debt goes through when contractual payments are not made.

Compound interest

Interest calculated on the principal sum of a debt, plus any interest that has accrued in previous periods. Each time interest is added, the total becomes the new sum on which subsequent interest is calculated.

Conditional sales agreement

Conditional sale is a type of credit agreement where you don’t own the goods until you’ve made all of the payments set out in the credit agreement. If you miss payments the goods may be repossessed.

Consolidation loan

The replacement of two or more loans with a new single loan, often with a lower monthly payment and a longer repayment period. Also known as debt consolidation.

Consumer Credit Act 1974 (CCA)

This is the law that governs personal loans and other credit agreements, such as hire purchase and credit cards. It sets the standards by which companies should comply when arranging credit and when recovering debts.

Continuous payment authority (CPA)

These are sometimes also called ‘recurring payments'. The company will ask for the long number across your debit or credit card rather than for your bank details. They are often used for things like payday loans or gym memberships.

Contents insurance

A type of insurance that contributes towards the cost of repairing or replacing possessions if they are stolen, lost or damaged.

Contractual payment

The amount you agreed to pay back towards a debt each month when you first signed the credit agreement. If you don’t pay the contractual payment you'll fall into arrears and it may affect your credit rating.

Council tax

Payment required by the local authority to cover the domestic services provided.

County court

A civil court generally used to settle disputes between parties who cannot otherwise reach an agreement.

County court bailiffs

County court bailiffs are civil servants who enforce county court orders and the orders made at tribunals which have been transferred to the county court for enforcement.

County court claim

A county court claim is a legal process creditors can use to collect an outstanding debt.

County Court judgment (CCJ)

A CCJ is a court order that tells you what to pay towards a debt.

Court action

If you can’t come to an agreement with creditors to repay a debt, they can take court action. 

Credit agreement

A legally-binding contract between a borrower and a lender detailing terms and conditions under which money was lent.

Credit card debt

This type of debt is covered by the Consumer Credit Act. Debt accumulates and increases via interest and penalties.

Credit file

Your credit file contains details of the money you’ve borrowed and the payments you’ve made or missed. Your credit file will also have information about any types of credit you have applied for. Also known as a 'credit report'.

Credit rating

Your credit rating is the method a creditor uses to assess whether they want to lend you money. All creditors will use different information to assess you and will score you differently.

Credit reference agencies

These companies keep financial information on almost every adult in the United Kingdom. They sell their data to potential lenders to search through when making a decision on whether they should lend to someone or not.

Credit searches

A potential lender will search the applicant’s credit file before making a decision about lending to them. These searches are recorded on the credit file.

Credit unions

Not-for-profit organisations, owned by their members, providing saving and loan facilities.

Creditor

A creditor is a person or a company (usually a bank) who lends you money.

Crisis loan

A temporary loan, issued by the Job Centre, for those in financial difficulties. It be made to people who are working or claiming benefits.

Critical illness cover

A type of insurance which provides a lump sum payment if you’re diagnosed with a specific illness.

Culpable neglect

When available income is spent on non-essential items rather than making court-ordered payments.

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D

Debt

The amount of money owed.

Debt Arrangement Scheme (DAS)

The Debt Arrangement Scheme is a statutory scheme run by the Scottish Government to help people living in Scotland repay their debts.

Debt collection agency

Organisations that chase outstanding debts. They are either employed by creditors to recover the debt or they can buy the debts from the creditors.

Debt consolidation

Debt consolidation is the term used for taking out a loan and using this money to repay other debts.

Debt management plan

A debt management plan is a way of repaying your debts by making reduced payments to your creditors if you can’t afford the full contractual payments.

Debt payment programme (DPP)

A formal repayment programme provided under the Debt Arrangement Scheme (DAS) in Scotland. A DPP lets you repay your debts over a realistic amount of time without the threat of court action from your creditors.

Debt relief order (DRO)

A debt relief order is a way of writing off your debts if you’re unable to pay them. It’s a form of insolvency. You have to owe less than £15,000 to apply for a debt relief order

Debtor

A debtor is someone who owes money.

Debtor contribution order (DCO)

This sets sets the amount you'll be required to pay on a regular basis during bankruptcy in Scotland.

Decree

A decree is a judgment or order, issued by the Scottish courts, for non-payment of a debt.

Deduction from earnings

The Child Support Agency can take money directly from wages if maintenance payments aren't made as agreed. No court order is required.

Diligence

The term for debt enforcement through the Scottish courts.

Default

When payments to creditors are missed, this is a default to the agreement. Recorded defaults can affect chances of applying for further credit.

Default notice

A creditor issues a default notice when the terms and conditions of a credit agreement are broken. For example, if you can’t pay your contractual payments.

Deficit budget

When your spending is higher than your income.

Dependent

A dependent is someone who relies on others financially, for example a child.

Diligences

Enforcement powers granted by Scottish courts that are used against a debtor for missed payment or non payment of a decree.

Direct Debit

An instruction you give your bank to pay a certain person or company each month. A Direct Debit can be for a variable amount.

Disassociation

Make a disassociation request so the credit files of third parties who have financial links to another, such as through a joint account, aren't checked.

Disbursement

A payment, typically one made by a solicitor to a third party and then claimed back.

Discharge

You are discharged from bankruptcy when all the conditions of the bankruptcy have been settled and the debts written off.

Discount rate

A discount rate is an interest rate that’s reduced for a certain amount of time before it reverts back to the standard rate. Discount rates are often offered as a type of mortgage rate, or for energy bills.

Disposable income

The amount of money you have available to spend on non-essential items after you’ve paid for your household bills.

Doorstep collector

An individual who collects money for a collection agency by visiting people at home, in an attempt to recover money for the debt.

Doorstep lender

Companies offering short-term, small loans to people on low incomes. Repayments are made weekly or fortnightly to collectors calling at customers' homes.

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E

Early repayment charge

Early repayment charges, or redemption penalties, are sometimes paid to lenders if you clear the debt before the agreement has ended.

Early settlement

Repaying some or all of the amount borrowed before the due date.

Earnings arrestment

Payments are deducted from wages after missed payments towards a decree. In Scotland only.

Endowment

A type of life insurance policy that is often used as a way to repay a mortgage where only the interest has been repaid to the lender.

Enforcement

The methods for recovering a debt that has been sued for successfully and judgment entered against the debtors. Examples include instructing bailiffs, charging orders, attachment of earnings and Third Party Debt Orders.

Enforcement agent

Another term for bailiffs.

Enforcement of Judgment Office

The enforcement of judgment office or EJO are responsible for collecting unpaid court debts in Northern Ireland

Equity

Equity is the difference between the value of your house and the amount outstanding on your mortgage and any secured loans. For example, if your house is worth £100,000 and you have a mortgage for £40,000 you will have £60,000 in equity.

Equity release

Taking a lump sum payment or a steady stream of income, using the value of equity in a house or other property.

Estate

Anything you own is your estate, for example your house, car and personal belongings. It also includes any rights you have to receive money or goods in the future.

Eviction

The legal process used to force you to leave your home. Bailiffs may change the locks to the house if you don’t leave voluntarily.

Examination of means

A hearing at a court in Northern Ireland with an enforcement officer, the purpose of which is to put together a financial statement to be sent to creditors. Debtors must attend this hearing, failure to do so, could lead to a warrant of arrest being issued.

Exceptional attachment

An order granted by the court in Scotland if a sheriff was unable to recover enough money to cover the debt. 

The exceptional attachment allows for the sheriff to try and recover goods from inside the property. There are restrictions on what the sheriff can take but they are able to force entry if the debtor is not present.

Exempt goods

Items that cannot be repossessed for payment of a debt.

Expenditure

Expenditure is all the money you spend on any outgoings.

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F

Family or friend loan

Money that is owed to a friend or family member.

 

Final discharge

A court notice that shows your bankruptcy has ended. This document will mean you’re debt free and the bankruptcy period is over.

Final salary plans

A final salary plan is a pension that is based on the number of years of service and the value of your final salary.

Financial Conduct Authority (FCA)

The Consumer Credit Regulator.

Financial ombudsman

The independent body settling disputes between businesses providing financial services and their customers.

Financial statement

A summary of your income and expenditure over a period of time, usually a calendar month, which can be sent to your creditors to show how much you can afford to pay towards your debts.

First right of appropriation

A process of earmarking funds in a bank account (including overdrafts) to ensure that priority bills and debts are paid before the bank take their charges.

Fixed rate

A fixed rate is an interest rate that doesn’t changed for a set period of time.

Forthwith judgment

A type of County Court judgment where the full amount of the debt is requested immediately or by a certain date.

Fuel Poverty

Where a combination of poor housing conditions and low income mean that the household cannot afford sufficient warmth for health and comfort. It's estimated a household needs to spend 10% or more of their income to meet fuel costs.

Full and final settlement

A way of settling the account by paying a lump sum that may be less than the outstanding balance. It is agreed by all parties the debt is settled when this payment is made.

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G

Gross

Gross is the total amount before any deductions. For example, gross salary is the total amount of your salary before the deduction of tax and National Insurance.

Guarantor

A guarantor is someone who agrees to pay a debt if the person who owns the debt fails to do so.

Guarantor loan

An unsecured loan where someone else is responsible for making the payment if the borrower is unable to pay.

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H

Harassment

Putting undue pressure on a debtor, by using threatening behaviour. Repeatedly contacting people within a certain time period or acting illegally. You can complain about harassment by debt collectors and bailiffs.

High court

The regional court which deals with civil claims involving sums of more than £50,000 and cases involving complex or important points of law.

High Court enforcement officer (HCEO)

A bailiff who executes High Court writs. There are only a few dozen HCEOs. Bailiffs who actually visit properties to collect payments are almost always private bailiffs appointed to act as agents of the HCEO.

High court judgment

A legal decision made by the High court.

Hire purchase

Hire purchase is a type of credit agreement where you don’t own the goods until you’ve made all of the payments set out in the credit agreement. If you miss payment the goods may be repossessed.

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I

Independent financial adviser (IFA)

Individuals who offer advice on financial products and investments. They are separate from any company providing the financial products.

Income

Any money you receive, for example wages, pensions or benefits.

Income drawdown

A scheme where an individual with a personal pension or stakeholder pension scheme withdraws ad hoc sums to provide them with income.

Income payments agreement (IPA)

An arrangement with the official receiver of a bankruptcy to contribute any disposable income towards the bankruptcy estate for a limited amount of time.

Income payments order (IPO

Enforcement using attachment of earnings when an IPA hasn't been adhered to.

Income protection

Income protection is a type of insurance. It provides a regular monthly income to replace your wage if you’re unable to work because of an accident or illness.

Income support

Income Support is a means-tested benefit for people who are on a low income.

Income tax

Income tax is an amount you have to pay on everything you earn and any pensions or investments you’ve got.

Individual voluntary arrangement (IVA)

An individual voluntary arrangement is a legally binding agreement between you and your creditors. Through an IVA, you pay back an agreed proportion of your debts over a set amount of time, usually 5 years.

Increasing term assurance

Increasing term assurance is a type of life insurance. It pays out a lump sum if you die within the term. The amount that is paid out increases the longer the insurance runs for.

Inflation

The rate at which prices for goods and services rise over time.

Inheritance tax

The amount your beneficiaries have to pay when you die. The amount they have to pay depends on the amount of assets you leave at the time of your death.

Inhibition

A court order in Scotland which prevents the debtor from selling an asset, usually a property, without giving the proceeds to the creditor. This is a form of diligence.

Insolvent

A person or a company is insolvent when they can’t afford to repay their debts in a reasonable amount of time and any assets they own are worth less than the amount of money they owe.

Insolvency

A legal process to get your debts written off. Insolvency solutions include bankruptcy, protected trust deeds and debt relief orders.

Insolvency administration order

Creditors can apply for an insolvency administration order within five years of a person dying. This allows the court to order the surviving owner to pay the value of the deceased person's equity into the estate. 

Insolvency practitioner

An insolvency practitioner is a person who is legally allowed to help people who can’t repay their debts.

Insurance

A contract between two people in which one party agrees to compensate the other party for any loss or damage caused by risks identified in the terms of the contract.

Interest

A charge for borrowing money or reward for saving money.

Interest only mortgage

A mortgage where the capital is repaid at the end of the term, usually from the proceeds of an investment plan, such as an endowment policy or an individual savings account (ISA). The borrower pays just the interest on the mortgage and the balance remains the same.

Interest rate

An interest rate is an amount of money added to credit, such as a loan, or paid on a credit balance, such as savings. It is normally shown as a percentage, for example 17.5%

Interim charging order

A temporary charge on a property to cover the time between a charging order being applied for and the court hearing.

 

Irregular bill

An irregular bill is one that you only pay occasionally, rather than every month or every week.

Individual savings account (ISA)

An ISA is an individual savings account where you don’t have to pay tax on the money you save. You’re only allowed to save a certain amount of money in the account.

IVA nominee

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

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J

Joint and several liability

This is where two people enter into a credit agreement and they're both are responsible for repaying the whole amount borrowed, rather than just half each.

Joint life second death policy

This is a type of life insurance that only pays out on the death of the second policy holder.

Judgment

An Northern Irish court order issued for non payment of credit debts. Similar to the CCJ in England and Wales.

Judgment (in default)

If you don't respond to a County Court claim form within the specified time limit, or where a response has been made but not accepted, the court issues the judgment in default and decides on the claim without a hearing.

Judgment debt

The debt plus interest and the cost awarded to the claimant in respect of its claim.

Judgment forthwith

Court order to pay the whole judgment debt immediately.

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K

Key facts document

A key facts document is a document given to you by the provider of financial products. It will clearly show you the costs and features of a particular financial product.

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L

Late fees

Charges that may be added to your account if you make a payment after the date you originally agreed.

Level term assurance

A type of life insurance. If you die within the term it pays out a lump sum. The amount you will be paid remains the same throughout the whole term.

Levy

The power to levy is what lets bailiffs seize and sell goods.

Liability

Liability is when you’re responsible for paying something. For example, making repayments on a credit agreement, utility bill or tenancy agreement.

Life cover

A type of insurance. It pays out a lump sum if you die during the term of the policy.

Limitation period

The period of time which a party has to make a claim where a contract has been broken.

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M

Magistrate court

A court that has minor civil and criminal jurisdiction.

Magistrate court fines

Criminal fines set by a magistrate, often relating to issues such as non-payment of council tax or parking infringements.

Magistrates financial penalty

The Magistrates court may fine you for committing a driving offence, not paying a fixed penalty notice, not having a television licence or many other criminal offences. They can also order you to pay compensation to any injured party and award costs against you.

Mandate of Authority

The letter gives a person or third party express permission to conduct business on behalf of another person. Also know as a Letter of Authority.

Marked goods

When seizing property in order to obtain o money owed, by the order of the Magistrates court, any goods impounded must be clearly marked. Marked goods must be left at the property until the day of sale.

 

Means enquiry

A summons so that the court can look over a person's financial situation and come to an arrangement about paying back money owed.

Means testing

Means testing is the method the Government uses to decide if you’re eligible for certain benefits.

Meeting of Creditors

Also known as a 341 meeting, this takes place during every bankruptcy case and permits questions to be asked of the debtor(s). Despite its name, creditors generally do not attend.

Minimal assets process bankruptcy (MAP)

A route into bankruptcy in Scotland aimed at people with a low income and not many assets. MAP bankruptcy is cheaper and more straightforward than sequestration (full administration) bankruptcy.

Minimum payment

This is the lowest payment a creditor will accept for a debt, unless a reduced payment plan has been arranged.

Money advisers

Approved money advisers in Scotland ensure you choose the best available debt relief option by carefully reviewing your finances, assessing your eligibility for each solution.

Money Judgment

Issued by the Northern Irish courts for non-payment of a debt.

Money purchase agreement

A form of pension where your final pension depends on stock market performance.

Monthly expenses

Items you pay for each month. They include your household bills and payments to your debts.

Mortgage

A loan that you take out to buy a house. If you miss payments to a mortgage, your lender could try to repossess your property.

Mortgage shortfall

If a home is not worth enough to repay the mortgage when repossessed, or if a borrower hands the keys back, the lender can ask for a payment for the difference.

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N

N244 application notice

Use this to ask a court to set aside or vary a County Court judgment, or to suspend the enforcement process. Find out more about other court forms.

Negative equity

When the total amount owing in secured debts on a property is more than the property’s market value.

Non-priority debts

Where if you don’t make payments, the consequences aren’t as serious as they can be with other debts. For example, you can’t lose your home or be sent to prison.

Northampton County Court bulk centre

Bulk users in court actions are businesses and local authorities. Their claims are issued by this centre in the name of Northampton county court.

Notice of correction

This is an explanatory statement of up to 200 words that's added to a credit file to explain why the information on there is incorrect.

Notice of disassociation

A note entered on to a credit file to remove a financial connection with someone, typically an ex partner.

Notice of intent

Issued in Northern Ireland before a creditor applies to the courts to recover the debt through a judgment. The notice gives the debtor 10 days to either pay the amount in full or to try to negotiate with the creditor.

Notice of seeking possession

A formal letter sent to a tenant before a landlord can take court action. Applies to council and housing association landlords.

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O

Official receiver

A court official who deals with bankruptcy. Also known as the 'trustee'.

Ofgem

The Office of Gas and Electric Markets (Ofgem) is the regulatory body for electricity and gas industry and protects the interests of consumers, ensuring they get value and choice.

Ombudsman

Ombudsmen do not have any formal power to reverse decisions, but they have substantial moral authority over companies or national or local government agencies.

Order for possession

An order made by the court before repossession of a property can be made. It allows the debtor to try and make an arrangement with the lender, in which case the order would be suspended.

Order for sale

An instruction granted by the court to force the sale of a property.

Ordinary cause

A Scottish legal procedure for making higher value claims through the sheriff court, including debt actions for over £1,500.

Outgoings

Deductions and spending.

Outright possession order

A court order that’s granted at a repossession hearing. It means the courts have given the lender ownership of your property. You will be given an eviction date for 28 days later. 

Outstanding balance

The amount left to pay.

Overdraft

An agreed overdraft is the limit up to which the account holder may borrow from the bank when there are no remaining funds in the account. Going over the agreed limit will lead to extra charges being added.

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P

Payment holiday

This is when a creditor agrees to let you stop making repayments on a debt for a fixed period of time.

Pension

This is a long-term investment plan that provides a lump sum or monthly income when you retire.

Pension credit

A means-tested benefit available to people who are over state pension age and have a low income.

Personal loan

Loans available from banks and other financial institutions to private individuals for personal use. Repayment periods vary from one year to five years. No collateral is asked for or given for the loan.

Policy

A legal document issued to you by an insurance company. It states the terms and conditions of the insurance.

Possession

The process of securing seized goods. Sometimes referred to as 'impounding'.

Possession order

An order made by the court permitting a lender or landlord to evict the person living in the property.

Payment protection insurance (PPI)

A type of insurance that was sold alongside loans, credit cards or mortgages. It covered repayments for a set period of time if you can’t pay because of an accident, illness or unemployment.

Premium

A single or regular payment made to a company for a product.

Priority arrears or debts

Priority debts are ones where, if you don’t make a payment, the consequences can be serious. For example the risk of the loss of your home or imprisonment.

Private pension

A type of pension that you pay and doesn’t include any additional contribution by employers or the Government.

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Protected Trust Deed

A protected trust deed is a legally binding arrangement in Scotland where you make reduced payments over 4 years. At the end of this time, your unsecured debts are usually written off.


R

Redemption penalty

Redemption penalties or early repayment charges are sometimes paid to lenders if you clear the debt before the agreement has ended.

Repossession

The legal process where a mortgage lender or secured loan provider takes ownership of a property. If you miss mortgage payments, your lender may ask the courts to evict you from your house. Your lender will then sell the property.

Remortgage

Remortgaging is when you take out a new mortgage to pay off an existing one, using the same house as security.

Right of offset

This can happen when you’ve got a bank account and a debt with the same bank. If you miss payments to the debt, your bank can take money out of your bank account to cover the payments you’ve missed.

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S

Section 2 order

A court order that you can apply for at a repossession hearing. You can apply if you want to stay in the property and can come to an arrangement to clear your mortgage arrears. You can also use this order to ask for time to find alternative accommodation if you can’t afford to stay in your home.

Secured creditor

A creditor with specific rights over some or all of the debtor's assets in the event of insolvency.

Secured loan

A secured loan is a loan that is attached to your house. If you miss payments to a secured loan, your lender could try to take ownership of your property.

Seizure order

Northern Irish enforcement that follows on from the custody warrant if no arrangements are made or kept to. The goods that were recorded under the warrant are removed and sold at public auction to cover the outstanding debt.

Sequestration

Sequestration is Scottish bankruptcy, also known as 'full administration bankruptcy'. It’s the legal procedure to write off debt that you can’t afford to pay back in a reasonable amount of time. If you’ve got any assets they will be sold to pay back your debt.

Sheriff officer

A sheriff officer is a Scottish court official. They are responsible for enforcing judgments and issuing court forms.

Shortfall

If you sell an item for less than the amount owed on the debt secured to it you’ll have a shortfall. For example, if you sell your house for less than the value of your mortgage. Your lender will expect you to repay the shortfall.

Standing order

An instruction you give to your bank to pay a certain person or company each month. A standing order has to be for a fixed amount.

Stakeholder pension

A type of pension that has to comply with certain Government standards. Stakeholder pensions are available from commercial companies such as banks, insurance companies and building societies.

Statute of limitations

Is a statute in a common law legal system that sets forth the maximum period of time, after certain events, that legal proceedings based on those events may be initiated.

Statute-barred debt

Legal term for a debt that can longer be pursued.

Statutory demand

A court order that demands you pay the full amount of a debt within 21 days. If the debt isn’t paid, the creditor can start bankruptcy proceedings.

Sub prime lending

The term for lending money to people who don’t have good credit history, normally a higher rate of interest is charged.

Supervisor

The person appointed to supervise the implementation of the debtor's proposals for an individual voluntary arrangement (IVA) or company voluntary arrangement (CVA) once approved by creditors and members.

Surplus income

This is the amount left after costs for all living expenses have been taken from all forms of income. This amount is what's available to repay what's owed.

Suspended possession order

A court order granted at a repossession hearing. It means that your lender can’t repossess your property as long as you make the payments the court asked for each month. This is usually your normal monthly payment and an extra amount to clear the arrears.

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T

Tenants in common

Where two or more people own a property, but if one of the owners dies their share of the property passes to their next of kin not the other owner(s), unless there is a will stipulating otherwise. The terms are defined by the percentage of the property that each person owns.

Term

The amount of time that a legal agreement, such as a policy, lasts for.

Term assurance

A type of insurance that pays a lump sum out if you die during the term of the policy. If you don’t die during the term, then the policy will finish, with no payout made.

Termination notice

A notice placed on a credit reference file when you fall behind with payments, often relating to direct mail order or store card debts.

Third party debt order

Legal proceedings to recover money owed to the debtor by a third party.

Tie-in

An agreement to keep a mortgage with a lender for a certain period of time. Penalties are payable if the agreement is broken.

Time order

A way of asking the courts to give you more time to pay a debt if you’ve missed payment. It can change the amount you have to pay each month or the term left on the credit agreement.

Time to pay direction

Scottish court forms included with the Summons that ask about financial situations and disposable incomes.

Token payment plan (TPP)

A temporary plan. With a TPP you pay £1 a month to each of your creditors until your situation improves enough so you can pay them more.

Tomlin orders

These can be issued as a replacement for a county court judgment if the judgment would affect the debtors’ employment. For example, if they work in the legal, financial or armed services. It has the same conditions applied as a county court judgment, but it's not registered on the debtors’ credit report.

Tracker rate

A tracker rate is an interest rate that follows the increases and decreases of another interest rate. For example, a tracker mortgage may follow the Bank of England base rate.

Transactions at an undervalue

Giving away an asset for less than it is worth. For example, giving away your car to a friend so that it wouldn’t be included in your bankruptcy.

Trust funds

Grants available to help individuals and families in need meet arrears of water and sewerage charges and other household bills and costs.

Trustee

An official of the Scottish courts who supervises a persons’ bankruptcy or protected trust deed. The trustee will be responsible for administering any payments or assets to the creditors. Also used as another name for the Official Receiver.

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U

Unit trust

A unit trust is an investment where a group of people leave their money with a professional manager who manages the total investment fund on their behalf.

Unsecured loan

An unsecured loan isn’t attached to anything. These are normally called personal loans.

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V

Variable rate

A variable rate is an interest rate that can increase or decrease. The amount is decided by the lender.

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W

Warran

Instruction from the creditor to the bailiff to begin a levy. This includes a distress warrant, writ of fieri-facias or warrant of execution.

Warrant of execution

If you don’t pay a county court judgment, the creditor will ask the courts for a warrant of execution. This gives bailiffs the right to try to recover the debt by taking items from your house and selling them.

Warrant of delivery

Method of enforcing a judgment for the return of goods (or value of the goods) whereby a bailiff is authorised to recover the goods (or their value) from the debtor and return them to the creditor.

Warrant to cite

When a creditor notifies a debtor they intend to apply for bankruptcy, in Scotland.

Wilful refusal

Making a deliberate decision not to pay a debt you know you're responsible for, even though there is money available. Usually used in reference to non payment of council tax, and if proven can lead to imprisonment.

Will

A will is an official statement of what you want to happen with any money or property after your death.

Working tax credit

Working tax credit is a means-tested benefit for working people who are on a low income to help with everyday living costs.

Writ of control

A High Court order instructing execution by High Court enforcement officers. More commonly referred to as a 'writ of fi-fa'.

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