For those who are in debt in Britain here are some of the basic debt related terms that you need to know:
Statement of Affairs (SOA)
A document that lays out all the details of your financial situation. It includes your monthly income and expenses; liabilities such as loans/mortgages; and assets such as your home.
Secured Debt
A secured debt is a debt secured against an asset that you own. Examples of secured debts are: a mortgage (secured on a property), a car loan (secured on a car). Usually, failure to pay a secured debt results in repossession of the asset.
Unsecured Debt
Unsecured debt is made up of loans not secured on an asset. For example, bank overdrafts, personal loans, credit card debt, store card debt, etc.
Default Notice
That nasty little letter from your creditors telling you that you have defaulted on your original credit agreement.
Solvent
Can you pay your debts? If not, if you sold everything you own could you then pay them? If the answer is yes then you are still solvent. Solvency is basically the ability to meet maturing obligations as they come due. You are not solvent if you can’t pay your monthly debt payments and, if you liquidated all your assets, the money raised would not be sufficient to pay off all your debts.
Insolvency
The opposite of solvent. The definition of Insolvency is that you are unable to service your debts and you have insufficient assets to pay your debts.
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Formal Arrangement/Agreement
An arrangement/agreement that is formally recognised by the law. An IVA, for example.
Informal Arrangement
An arrangement that is an informal (i.e. does not follow formal legal rules) agreement between you and your creditors.
Individual Voluntary Arrangement (IVA)
A Legal procedure which allows companies or individuals to make a formal arrangement with their creditors to pay their debts over a period of five years. The agreement can offer a write off of some of the debt at the end of the five year period.
Insolvency Practitioner (IP)
A licensed professional who acts as a nominee or supervisor for an IVA.
Certificate of discharge / Certificate of Satisfaction / Statement of Completion
A certificate received on discharge from bankruptcy or on successful completion of your IVA. You send it to the credit reference agencies to update your file.
Bankruptcy
Bankruptcy is a legal proceeding made on behalf of someone who is insolvent. You can be made bankrupt by your creditors or you can petition for it yourself in court. Most of your debt is written off after a period of about one year.
Bankruptcy Order
A court order declaring you bankrupt.
Bankruptcy Restriction Order
An order applied to lengthen the term of the bankruptcy. It is usually imposed where the bankrupt was dishonest or especially blameworthy for the bankruptcy.
Income Payments Order / Income Payments Agreement
An order or agreement between you and the trustee governing how much you pay back monthly while you are in bankruptcy.
Official Receiver
A public servant who deals with your bankruptcy.
Trustee
A professional, appointed when you are made bankrupt, in order to control and sell your assets to raise money to pay your creditors.
Certificate of Summary Administration
If you go bankrupt with debts less than 20,000, you can obtain a summary administration. The discharge period is shorter and the Official Receiver acts as the trustee to administer your debts.
Discharged
Released from the legal restrictions imposed on you by Bankruptc