Topic 11

Question 1

Administration order

Answer 1

A repayment plan arranged by county courts in England, Wales and Northern Ireland for people with less than £5000 in unsecured debt and at least one county court judgement against them. They pay what the court decides they can afford to them each month and then the court pays money back to their creditors.

Question 2

APR

Answer 2

Annual percentage rate, the total cost of borrowing over one year, including the interest charged and any fees.

Question 3

Assets

Answer 3

Things a person or a business owns, for a person this may include property, jewellery or financial products such as company shares.

Question 4

Balance transfer

Answer 4

Moving the balance on a card from one card provider to the other

Question 5

Bankruptcy

Answer 5

A situation in which a person cannot pay their debts and is subject of a court order that shares out their assets between their creditors

Question 6

Benefit

Answer 6

A government payment made to individuals who meet specific conditions to help them meet their living expenses. For example people who are unable to work because of a disability.

Question 7

Budget

Answer 7

A plan of expected incomings and outgoings over a set time period such as a month.

Question 8

Citizens Advice

Answer 8

A charity providing free, independent, confidential and impartial advice on citizens’ and consumers’ rights and responsibilities.

Question 9

Consolidation Loan

Answer 9

A loan used to pay off a number of different debts, meaning that there is only one payment to make each month to a loan company

Question 10

County Court Judgement CCJ

Answer 10

In England and Wales, a judgement issued by a county court to a person who does not respond to court action from a person or organisation to which they owe money. The CCJ affirms that the money is owed.

Question 11

Individual voluntary arrangement IVA

Answer 11

A formal alternative to bankruptcy compromising a contractual agreement with those owed money

Question 12

Insolvency

Answer 12

A situation in which a person cannot repay what they owe because their debts are greater than their assets

Question 13

Minimal Asset Process MAP

Answer 13

Available in Scotland and similar to a DRO. The MAP is the route into bankruptcy for people with less than £2000 in assets

Question 14

Money Advice Service

Answer 14

A consumer information service set up by the government to help people make informed financial decisions

Question 15

Mortgage

Answer 15

A loan taken out to pay for a property, usually over a long term, e.g. 25 years

Question 16

Overdraft

Answer 16

A facility which allows an account holder to withdraw more money than they actually have in their account

Question 17

Recession

Answer 17

A period of at least 6 months when the amount of goods and services a company is producing is shrinking

Question 18

Sequestration

Answer 18

The term for bankruptcy in Scotland, which applies to people who owe more than £1500, have not been bankrupt in the last 5 years and have had court judgements for payment made against them.

Question 19

Trust deed

Answer 19

Available in Scotland and similar to an individual voluntary arrangement IVA. An insolvency practitioner helps people who are insolvent to make affordable repayments, and after 3 years any outstanding debt is written off.

Question 20

Utility

Answer 20

An essential public service, such as electricity, gas, water and sewerage.

Question 21

Credit card

Answer 21

A card that allows the holder to make purchases face to face, online or over the phone, and to withdraw cash from an ATM. The provider pays for the things, and then the card holder pays it back either at once or in instalments.

Question 22

Credit history

Answer 22

A record of money borrowed and repaid by an individual. These records are held by credit reference agencies and providers will check the individual’s credit history when a prospective customer applies for a borrowing product.

Question 23

Creditor

Answer 23

A person or organisation to whom someone owes money.

Question 24

Debt Management Company DMC

Answer 24

An organisation to which a person in debt (debtor) pays what they can afford each month. The DMC then deals with the creditors owed money.

Question 25

Debt management plan

Answer 25

A detailed plan drawn up by a debt management company and sent to an individual’s creditors. It sets out an affordable monthly payment shared between the creditors.

Question 26

Debt Payment Programme DPP

Answer 26

A Scottish government run programme similar to a debt management plan

Question 27

Debt Relief Order DRO

Answer 27

An order a person in specific conditions can apply for if they cannot afford to pay off their debts. It generally lasts one year, during which time none of the people owed money can take action, and after which the listed debts are cleared. Granted by the Insolvency service, a DRO works out cheaper than going bankrupt.

Question 28

Debtor

Answer 28

A person in debt to an individual or organisation (creditor)

Question 29

Guarantor

Answer 29

Someone who undertakes to repay a financial obligation if the person who took on the obligation in the first place cannot or does not repay it. For instance a guarantor might agree to pay rent or make repayments on a loan on someone else’s behalf.