Topic 11: Dealing with debt Flashcards
Administration order
A repayment plan arranged by county courts in England, Wales and Northern Ireland for people with less than £5,000 in
unsecured debt and at least one county court judgment (CCJ) against them. They apply to the court to have an administration
order issued, then pay what the court decides they can afford directly to the court each month, and the court makes repayments to their creditors.
APR
Annual percentage rate – the total cost of borrowing over one year, including the interest charged and any fees
Assets
Things that a person or a business owns. For a person their assets might include property, jewellery or financial products such as company shares.
Balance transfer
Moving the balance (total amount owed) on a card from one card provider to another
Bankruptcy
A situation in which a person cannot pay their debts and is the subject of a court order that shares out their assets between their creditors.
Benefit
A government payment made to individuals who meet specific conditions to help them meet their living expenses. For example, people who are unemployed, unable to work because they care for a disabled person, or have a disability themselves
may be entitled to benefits if they meet the criteria
Budget
A plan of expected incomings and outgoings over a set time period such as a month
Citizens Advice
A charity providing free, independent, confidential and impartial advice on citizens’ and consumers’ rights and responsibilities.
Consolidation loan
A loan used to pay off a number of different debts, meaning that there is then only one payment to make each month, to the loan
company.
County court judgement (CCJ)
In England and Wales, a judgment 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.
Credit card
A card that allows the holder to make purchases face to face, online or over the phone, and to withdraw cash from an ATM.
Unlike a debit card, where the money is taken from the holder’s own account, transactions are paid by the card provider. The card holder repays the amount owed to the provider either in one payment or in instalments. The provider charges interest on cash withdrawals from the time the withdrawal is made and on
purchases after a certain period.
Credit history
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
Creditor
A person or organisation to which someone owes money.
Debt Arrangement Scheme
A Scottish government-run programme similar to a debt management plan. It involves arranging to make payments via a debt payment programme.
Debt management company (DMC)
An organisation to which a person in debt (debtor) pays what they can afford each month. The DMC then deals with the
organisations (creditors) owed money.
Debt management plan
A detailed plan drawn up by a debt management company (DMC) and sent to an individual’s creditors (entities they owe
money). It sets out an affordable monthly payment shared between the creditors
Debt relief order (DRO)
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.
Debtor
A person in debt to a individual or organisation (creditor)
Guarantor
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.
Individual voluntary arrangement (IVA)
A formal alternative to bankruptcy comprising a contractual arrangement with those owed money.
Insolvancy
A situation in which a person cannot repay what they owe because their debts are greater than their assets
Minimal asset process (MAP)
Available in Scotland and similar to a DRO. The MAP is the route into bankruptcy for people with less than £2,000 in assets.
MoneyHelper
An independent organisation set up by the government to support people to make the most of their money and pensions.
Mortgage
A loan taken out to pay for a property, usually over a long term such as 25 years.
Overdraft
A facility that allows an account holder to withdraw more money than they actually have in their accoun
Recession
A period of at least six months when the amount of goods and services the country is producing is shrinking
Sequestration
The term for bankruptcy in Scotland, which applies to people who owe more than £1,500, have not been bankrupt in the last five years and have had court judgments for payment made against them.
Trust deed
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 three years any outstanding debt is written off.
Utility
An essential public service, such as electricity, gas, water and sewerage.
