Unit 3 Topic 5

Question 1

An administration order is a repayment plan arranged by county courts in England, Wales and Northern
Ireland for people with less than £3,000 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. True or False?

Answer 1

False
Repayment plan for people with less than £5,000 in unsecured debt and at least one CCJ against them. (Not £3000)

Question 2

What are arrears?

Answer 2

Unpaid overdue debt

Question 3

Define bankruptcy

Answer 3

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.

Question 4

What type of loan is this referring to?
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.

Answer 4

Consolidation loan

Question 5

What is a CCJ? What does it affirm?

Answer 5

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.

Question 6

What’s a ‘credit crunch’?

Answer 6

A reduction in the availability of loans or a tightening of the conditions
needed to obtain one. The global financial crisis of 2007–08 began when
financial institutions became reluctant to lend funds to one another.

Question 7

What’s a creditor?

Answer 7

A person or an organisation to which a debtor owes money.

Question 8

What is a credit reference agency?

Answer 8

An independent organisation that maintains records of people’s credit
history – that is, what they have applied to borrow, what they have actually
borrowed and whether they have paid it back. The data is provided by
lenders.

Question 9

What is this refering to? A detailed plan drawn up by a debt management company (DMC) and sent to
an individual’s creditors. It sets out an affordable monthly payment shared
between the creditors.

Answer 9

Debt management plan (DMP)

Question 10

Describe what a debt relief order is. How long does it last? Who are they granted by?

Answer 10

An order a person in specific circumstances 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.

Question 11

What works out cheaper - getting a DRO or bankruptcy?

Answer 11

DRO (debt relief order)

Question 12

What does it mean to default?

Answer 12

To fail to repay borrowing when the repayment is due.

Question 13

What is discharged debt?

Answer 13

When the debt has been repaid in full or a period of time has elapsed which
means the debt will no longer have to be repaid.

Question 14

Name some examples of what a financial footprint would look like.

Answer 14

outstanding debts; missed
payments; loan applications; increases in borrowing; and previous
borrowing.

Question 15

Explain hardcore debt

Answer 15

Debt that a person is not in a position to repay because their regular
outgoings take up all their available income.

Question 16

What is hire purchase?

Answer 16

A type of secured consumer credit, to finance items such as cars and
furniture, which involves the borrower repaying over a number of years.

Question 17

What is an individual voluntary agreement? (IVA)

Answer 17

A formal alternative to bankruptcy comprising a contractual arrangement
with those owed money.

Question 18

What is a liscenced insolvency practitioner?

Answer 18

A company or person that sets up and supervises IVAs.

Question 19

Explain loan forebearence

Answer 19

When a lender does not seek to repossess a property as soon as the
borrower misses a few monthly payments, instead allowing the customer to
stop paying or make reduced payments for a set period.

Question 20

Who is an official reciever?

Answer 20

An officer of the bankruptcy court who takes over the finances of a bankrupt.

Question 21

What is a recession?

Answer 21

A period of at least six months in which the amount of goods and services
the country is producing is shrinking.

Question 22

What is reposession?

Answer 22

A legal process whereby a financial institution (eg a mortgage lender) takes
ownership of an asset, often a house, because loan repayments relating to
that asset have not been met. Repossession is the last resort in the process
of recovering money owed.

Question 23

Explain Sharia law

Answer 23

Rules that devout Muslims follow which, in relation to personal finance,
prohibit the paying and receiving of interest; this virtually excludes a strict
Muslim from doing any borrowing.