Glossary of Terms
Accident, Sickness, Unemployment Insurance (ASU)
This Policy pays a percentage of the monthly mortgage payment if you cannot work because of one or more of the above instances. It only covers specific instances and will not be paid for a predefined period.
An order made by a county court to arrange and administer the payment of debts.
Adverse Credit (Also Impaired Credit)
A term used to describe someone with a history of poor credit transactions. This could include late payments, County Court Judgments (CCJ’s), mortgage arrears or Bankruptcy.
A Lawyer is responsible for arguing a case in court-either on behalf of a debtor, or a creditor.
Stands for Annual Equivalent Rate and usually specifies the interest paid from current, deposit or savings accounts. This new term replaces CAR (Compound Annual Rate) which denoted much the same thing
A person who acts on behalf of another company, without usually being employed by them.
Annual Percentage Rate (APR)
The interest rate used for comparison between mortgages that include mortgage repayments and any other associated fees charged, such as application, Redemption or Legal Fees.
When you fail to meet the contractual payments to your household bills this is when arrears occur. Serious arrears which must be paid immediately can occur if you miss payments to your mortgage, rent or council tax. You can also be in arrears if you don’t maintain your payments on unsecured debts. If you continue to miss payments then arrears will accumulate and you will be required to pay an additional amount on top of the regular payments until the arrears are cleared.
Items you own that have monetary value are known as assets. Assets would include for instance your property, car, stocks, shares, antiques and savings etc.
If a creditor sells the debt to another company; this is assignment and shouldn’t be confused with a creditor passing the debt to a collection on agency that acts on behalf of the creditor.
Debts which are regarded by companied as being unpaid, and unlikely to be paid.
Employed mainly by the Court to enter into your property and take goods to sell at auction to cover debt that you owe to a lender who has previously issued a CCJ to which you have failed to pay.
A business that holds money for its clients, lends money at interest and trades generally in money.
A person that has been declared insolvent through a court proceeding and is relieved from the payments of debts after the surrender of assets to a court appointed trustee.
A situation where an individual is incapable of settling his/her debts and has been served a bankruptcy order by a court. The petition can be either filed by the individual concerned or his/her creditors. An inquiry into the debtor’s affairs is made by the Official Receiver and the debtor’s assets are realised and distributed among creditors.
Bankruptcy restrictions order or undertaking
A procedure introduced on 1 April 2004 whereby a bankrupt who has been dishonest or in some way to blame for their bankruptcy may have a court order made against them or give an undertaking to the Secretary of State which will mean that certain bankruptcy restrictions continue to apply after discharge for a period of between two to fifteen years.
The base interest rate determined usually by a County’s central bank ( such as bank of England) upon which all other lending and savings interest rates are based.
The monetary amounts payable by the insurance company to a claimant, assignee, or a beneficiary under the terms of an insurance policy.
A slang term for someone who is declined credit. In reality there is no ‘black list’, credit decisions are made on a varying ‘credit score’ basis. If you are denied credit from one lender, you may be accepted by another lender, although the interest rates may be higher
This is when a property is purchased with a view to renting it out rather than living in it.
A lump sum of money. This usually refers to the amount you invest in a fund at the outset- e.g. your original capital.
Capital and Interest Mortgage
Your monthly repayments are partly to pay the interest on the amount you borrowed, and party to repay the amount you borrowed. At the end of your mortgage, the capital and the interest is all completely repaid. It is also known as a repayment mortgage.
Like a fixed rate, but the rate is guaranteed not to go above a certain level for a set period of time. It can, however, move downwards.
An arrangement that caps your mortgage rate for a specified period of time. On the first day of the month following expiry of the capped rate period, the interest rate will change to the then prevailing Standard Variable Rate.
Cash Surrender Value
The amount of money received when a policyholder surrenders a life insurance policy with cash value.
Conditions attached to an insurance quotation.
See County Court Judgment
Certificate of Satisfaction
A certificate issued by the court to prove a County Court Judgment (CCJ) or Attachment of Earnings has been paid.
Security interest taken over property by a creditor to protect against any non-payment of their debt.
The Charging Orders Act 1979 allows creditors with a high court judgment or county courts judgment the ability to secure the debt to assets. A charging order can’t be made unless payments have been defaulted during the CCJ.
Property acceptable as security for a loan or other obligation.
A company hired by a creditor to collect a debt that is owed.
Company Voluntary Arrangement (CVA)
This is the business equivalent to an Individual Voluntary Arrangement. A CVA allows a financial problem to be overcome with the creditors consent so that the business can continue to trade.
An agreement between debtor and the creditors whereby the compounding creditors agree with the debtor between themselves to accept from the debtor payment less than the amounts due to them in full satisfaction of their claim.
The combining and repayment of several debts by borrowing the amount owed through one new debt. It is often possible to reduce interest charges or monthly outgoings by doing this. Often savings are made by converting unsecured debts to secured debt. This however puts the asset used as security at risk if payments are not maintained in full. Interest rates on secured loans are often lower than for unsecured loans because there is a lower risk of non-payment to the lender.
When you signed the credit agreement, these are the payments you agreed to pay each month. Failing to make the contractual payments can lead to arrears and further charges. This can affect your credit rating.
County Court Judgment
A judgment issued by the court in order for you to make payments to a debt you owe when you have failed to keep an original agreement with the lender and not make any attempts to come to an agreement of repayment.
Court Claim Form
Formal document sent to inform you that a creditor has begun legal proceedings against you. You are given 14 days to respond to the form. Ignoring the claim can result in a Judgment being registered by default and an order to pay the whole amount immediately.
This is either borrowed money or other finance that has to be paid back under an arrangement with a lender.
A credit card gives you the power to buy goods or services now and pay for them later. It represents an approval by a bank or company to use their money. Credit card issuers are usually banks, even though some cards may bear another company name or logo. The name of the issuer appears somewhere on the card. Trade names such as VISA and MasterCard are not actually card issuers. They are termed ‘membership associations’. Banks use them for their payment processing services, policy setting and marketing assistance. Many different banks can package their own cards and different terms of credit using logo and services of an association membership.
A file held by authorised companies with financial history regarding credit applications and credit you have borrowed, including payment history.
A points rating used by banks, mortgage companies and other financial institutions that offer loans. An individual or company is assessed for credit worthiness and risk. Your credit report is compiled by credit reference agencies using public records, such as: the electoral roll, court Judgments and bankruptcies and also information from other lenders and financial institutions. If you are declined credit the lender should inform you the main reason for this. If the decision was based upon a bad credit report, you should obtain the name and address of the Credit Reference Agency they used. You have the right to view the information contained in our credit report to make sure it is accurate.
Credit Reference Agency
A private company that keeps computer records about the use of credit by individuals. When someone applies for credit, the credit company will check with the agency about your previous credit history before deciding whether to offer the credit.
A person, or, company that lends you money (usually a bank, building society or credit card company).
Debit cards look like Credit Cards and ATM (Automated Teller Machine) cards, but operate like electronic cash or a personal cheque. When a purchase is made with a debit card, the amount is automatically deducted from the associated account. No credit is extended to the card holder and hence no debt or interest charge in incurred.
Debt Collection Agency
Creditors can employ or sell the debt to a debt collection agency that will chase the outstanding debt. They are not Bailiffs and have very little power to collect the debt and should be treated the same as any other unsecured creditor.
Bringing a number of debts together into a single loan, in order to pay a lower rate of interest. Consolidation loans can also be repaid over a longer period of time, making monthly payments much lower.
An informal process of negotiation with unsecured creditors to obtain a reduction in the contractual repayment and /or a reduction in the interest /charges being levied by the creditor. The negotiation process involves providing proof to the creditor that the individual has insufficient income to meet all their contractual liabilities.
Debt Management Plan
Most debt management involves joining a plan administered but a debt management company. This involves the company dealing with your creditors to negotiate a lower payment level, and you making a single monthly payment to the company.
A debtor is someone who is in debt and is required to repay their creditors.
A notice issued by a creditor when a financial agreement that was been made between you and your creditor fails because the arrangement has not been kept. A default notice is the lender informing you that they are intending to take steps to recover the money.
If your income is less than your expenditure i.e. you are spending more than you are bringing in, this is a deficit. Reducing your outgoings or increasing your income can assist in a financial deficit.
People who rely on others for their living requirements & have no income of their own.
An account with a bank and building society, which pays a variable rate of interest. Higher rates are often available if you are willing to give notice before withdrawing your money.
A procedure under which an organisation to which a payment is due claims the amount directly from the bank account of its debtor.
Discharge from Bankruptcy
It is a process that takes away the restrictions of bankruptcy and releases you from most of the debt owed at the date the bankruptcy order was made.
The time that someone who is bankrupt will remain bankrupt.
This is the duty of any person when making an application for an insurance policy or mortgage to disclose all relevant personal details that may affect the underwriting of the risk.
An arrangement which gives you a set reduction, or ‘discount’ off the standard variable rate for a specified period of time. At the end of the specified period your mortgage rate will change to the standard variable in force at the time. Occasionally there can be redemption penalties associated with this type of deal.
The amount of personal income an individual has after taxes and government fees, which can be spent on necessities, or non-essentials, or be saved.
This is the right for anyone who rent is payable to, to sell debtors goods to contribute to the payment of rent arrears.
Any sum distributed to unsecured creditors in an insolvency.
A life assurance policy related to a mortgage designed to pay off the amount originally borrowed at the end of the mortgage term. An endowment policy will pay you a fixed amount on a set date or if you die before that date, in other words it’s both a ways of saving and life insurance. People often use endowments to repay interest only mortgages. The drawback of them is that it is often unclear how much you are having to pay in charges and the plans are often very rigid, so if you start an endowment and then decide to cancel it, you may not get back what you paid in.
You only pay interest to the lender, but you also have to pay a monthly premium for an endowment policy that you take out with an insurance company. The endowment policy is designed to produce a lump sum either at the end of your mortgage term or at your death if earlier, to repay the capital you borrowed. You must remember though that the amount paid out is not guaranteed and may not be sufficient to repay the capital borrowed.
This is the difference between the value for the mortgage against a property and its current market value. If the sum of all the loans secured on a property is greater than market value, this is known as negative equity.
A type of remortgage where you own your own home outright but wish to use it as security for new borrowing.
Where a customer buys a product without receiving advice on its suitability.
A final discharge will be posted to you to show the end of your bankruptcy. This document will mean you are free from debt and the bankruptcy is over.
A charge held over a specific asset. The asset cannot be sold without consent of the secured creditor prior to repaying the amount secured by the charge.
The interest rate is fixed for a set period.
When a person has assured the creditor that the debtor will make the repayments. If the debtor fails to make the payments the guarantee will be liable for them.
A written agreement to pay a debt owed by a 3rd party.
Hire Purchase (HP)
A method of buying goods in which the purchaser takes possession of them as soon as he has paid an initial installment of the price (a deposit) and obtains ownership of the goods when he has paid all the agreed number of subsequent installments. A hire-purchase agreement differs from a credit-sale agreement and sale by installments (or a deferred payment agreement) because in these transactions ownership passes when the contract is signed. It also differs from a contract of hire, because in this case ownership never passes. Hire-Purchase agreements were formally controlled by government regulations stipulating the minimum deposit and the length of the repayment period. These controls were removed in 1982. Hire-purchase agreements were also formally controlled by the Hire Purchase Act (1965), but most are now regulated by the consumer Credit Act (1974). In this Act a hire-purchase agreement is regarded as one in which goods are bailed in return for periodical payments by the bailed; ownership passes to the bailed if he complies with the terms of the agreement and exercises his option to purchase. A hire-purchase agreement often involves a finance company as a third party. The seller of the goods sells them outright to the finance company, which enters into a hire-purchase agreement with the hirer.
Income Payments Order
A court order for a debtor to pay part of their surplus salary/income to the trustee.
Individual Voluntary Arrangement (IVA)
A formal legally binding agreement between an individual who is unable to pay their creditors and a licensed Insolvency Practitioner. The insolvency practitioner will put together a form of proposal to the creditors for approval and administer the IVA. The individual must be resident in England, Wales or Northern Ireland.
This is simple term for arranging reduced payments to your creditors without the assistance of a third party.
Having insufficient funds to meet all debts, or being unable to pay debts as and when they fall due.
Insolvency Act 1986/2000
Legislation bringing together insolvency law and procedures.
An authorised person who specialises in insolvency. They are authorised by the secretary of State or by a recognised body (normally accountants/solicitors). It is recognised in Law, that only an authorised Insolvency Practitioner can arrange for you to go through an Insolvency procedure.
Accounts where you don’t lose interest even though you may withdraw money without giving the bank notice. The One account gives you instant access to your funds. All you have to do is write a cheque, arrange a transfer or use your Switch or VISA cards.
The charge you pay if you borrow money, and the income you receive if you lend it or invest it in an income-producing bank account or in a security like a bond or a gift.
Interest Only Method
One of two ways used to pay off your mortgage, the other being Repayment method. Your monthly payments are solely used to pay off the interest you owe on your belongings. This means, you’ll have to make provision to pay off the amount you actually borrowed at the end of your mortgage term, for example using an ISA, a pension or an endowment.
An individual who intends to propose a voluntary arrangement to his creditors may apply to the court for an interim order which, if granted, prevents bankruptcy or other legal proceedings against the individual whilst the order is in force.
A person or organisation that offers advice and arranges policies for clients. Under UK regulations, intermediaries must be either (1) ‘Tied’, whereby they represent only one company in the case of life business or a limited number of companies for general business, or (2) ‘Independent’, whereby there is no limit on the number of companies with which they can deal.
The person chosen by an individual to report on the debtors proposals for an IVA. This will usually be an Insolvency Practitioner
Joint & Several Liability
When you take out a credit agreement, such as a loan or overdraft in joint names (with another person) then you are both liable for the full amount of any debt. (Credit cards are not normally joint names, although you may have two cards).
Recognition of a debt by a court.
The legal document held by the Land Registry that identifies who has a claim on your property. The main lender will normally be identified as the first charge (i.e., have first claim to the property) but there may also be other charges registered (i.e., second, third, etc).
A person or company which lends you money (usually a bank, building society or credit card company).
When the bailiff retrieves payment or goods to raise the sum on the warrant and costs. Notice of this comes 7 days before the bailiffs arrive.
This order follows no payment of council tax 28 days after due date, if a court summons is issued and not paid within the time a liability order is issued. It allows authorised to make arrangements for the arrears to be paid by deducting it at source, from wages.
Any insurance relating to a risk depending on human life. This includes contracts providing payment on the insured person’s death, endowments providing payment either on survival to a specified date or on earlier death and annuities which are paid throughout the annuitant’s lifetime but cease on death.
Loan to Value. This is the amount of the mortgage expressed as a percentage of the value of the property, or the price you are paying for the property. So a £60,000 mortgage on a £80,000 property would mean a LTV of 75%.
A settlement whereby the beneficiary receives the entire proceeds of a policy at once rather than in instalments.
A type of secured loan
Income distributions are paid with a 20% tax credit. If you are liable to lower rate or basic rate income tax, you will have no further liability to tax. If you are a higher-rate taxpayer, you will have an additional income tax liability. If you are a non-taxpayer, you may be able to use the tax voucher supplied at the time of the distribution to support a tax repayment claim. Wherever you see a gross income figure quoted, it means that no tax has been deducted (e.g. as with a PEP investment).
The person chosen by the individual debtor to report on the debtor’s proposals for an IVA.
Non-payments to these creditors (sometimes known as secondary creditors) would incur less severe consequences than the non-payment of priority creditors.
The process of becoming obsolete: falling into disuse or becoming out of date.
The official Receiver deals with the administration for the bankrupts. They will normally carry out an interview of the bankrupt and it is ultimately their decision as to whether assets should be sold for the creditors benefit.
An independent official to whom grievances can be aired, free of charge. Ombudsman is a Swedish word meaning citizen’s representative. The insurance Ombudsman Bureau aims to increase confidence in Insurance by offering an independent resource for resolving disputes between insurance companies and their customers.
When the amount of money withdrawn from a bank account is greater than the amount actually available in the account the excess is known as an ‘overdraft’ and the account is said to be ‘overdrawn’. If agreed in advance by the bank this is essentially a form of loan facility. If not agreed in advance by the bank penalty charges may be incurred.
A feature offered by some mortgages that allow you to miss monthly payments on your mortgage. Payment holidays are particularly useful if you have some other major expense-like a new baby or a wedding-to cater for.
An order made by the Court permitting a lender or landlord to evict the person living in the property.
A creditor who is entitled to receive payment prior to other unsecured creditors.
The single or regular periodic payment made to an insurance company in respect of an insurance policy.
A payment card where an amount of money is loaded onto it before it is used. The card can be used to buy goods and services, or may allow you to withdraw cash from cash machines. Charges may be applied for various services. Some prepaid cards can be reloaded.
Those where non-payment could result in loss of property, essential services or imprisonment, e.g. mortgage, rent, gas, water, electricity, Council Tax, court fines and maintenance.
Proof of Debt
The document submitted in insolvency by a creditor to establish a creditor’s claim. This may be informal (by letter) or in a prescribed form for bankruptcy and compulsory liquidations.
During an IVA a creditor may put a restriction on your property. Usually the restriction will only apply during the time of the arrangement.
This means ‘in proportion to’. For example, if you owe Barclaycard £100, HSBC £900 and have £100 to pay them each month, the pro-rata payment to Barclaycard would be £10 per month and £90 per month to HSBC.
The authority given by a creditor or member to another person (proxy holder) to attend a meeting and speak and vote at a meeting on behalf of the creditor (principal) or member.
For all Mortgages, if you pay off the whole or any part of the loan before the end of the mortgage term, you may have to pay a redemption charge. This will be an amount specific to the mortgage product you have taken. There may also be additional fees charged in addition to interest if you redeem you mortgage early to cover reasonable administration costs, these may include charges for retrieving and checking the deeds and documents, formal sealing, recording of documents sealed and secure postage.
If you want to pay off your mortgage early, you may have to pay a fee during the early years of the loan. Some lenders only charge a redemption penalty during the time of the special deal they offer. Others may tie you in for a number of years afterwards. If you think you may want to repay early, check what conditions apply before you decide which type of mortgage you want.
A secured loan taken to repay an existing mortgage but can also be used to raise additional funds in excess of the original debt.
Your monthly payments are partly to pay the interest on the amount you borrowed, and partly to repay the amount you borrowed. At the end of the mortgage, the capital and the interest is all completely repaid. It is also known as a capital and interest mortgage.
A schedule you agree with a lender for repaying the amount you have borrowed over the mortgage term.
This is when a borrower fails to pay back their loan in accordance with the Terms and Conditions of that loan and the lender exercises their legal charge over the borrower’s property by taking legal ownership.
Any borrowing which is made against a valuable item-usually property. If you fail to make the payments, the creditor has the right to claim the property which the loan is secured against.
A creditor with specific rights over some or all his debtor’s assets in the event of insolvency. In essence he is paid first from the secured assets.
A loan where the creditor holds security such as a mortgage or charge over a persons assets for monies owed. Failure to repay the debt can lead to the property being repossessed /sold.
Pre authorised payment in which the customer gives instructions to their bank to pay fixed sums at regular intervals or on defined dates.
A formal notice requiring payment of a debt exceeding £750 within 21 days, in default of which bankruptcy or liquidation proceedings may be commenced without further notice.
The person appointed to supervise the implementation of the debtor’s proposals for an IVA or CVA once approved by creditors (and members).
Where you cancel an investment or policy and usually receive a reduced payout, due to the impact of charges.
The amount of money paid to the policyholder by the insurer when certain types of life policy are discounted before the full benefit becomes payable.
Suspended Possession Order
The Court agree to give a possession order to a lender but also states that they cannot evict the person living in the property as long as that person keeps to an agreed payment schedule to clear any arrears that have arisen and maintain future mortgage/rent payments.
When you are unable to make repayments to your creditors, it may be necessary to make small ‘token payments’ to each creditor. This may be as little as £1.00 each per month, but it is better to send this ‘token payment’ than send nothing at all.
Either the official receiver or the insolvency practitioner who will take control of the selling of assets during an IVA or bankruptcy.
Someone against whom a bankruptcy order has been made and who has not been discharged from bankruptcy.
Any borrowing which is not made against any item. Creditors have less ability to retrieve unpaid debts, and are therefore not likely to loan as much on an unsecured basis. This usually refers to a loan, credit card, store card or catalogue where monies are not secured on any asset or property.
Strictly, any creditor who does not hold security. More commonly used to refer to any ordinary creditor who has no preferential rights.
Carried out by a professional surveyor to establish how much the property is worth and whether it is suitable to lend a mortgage on. There are 3 types of valuation that can be done, a basic valuation, homebuyers report or full structural survey.
When a CCJ has been ordered but due to unforeseen circumstance the debtor can’t pay it, an application to vary the payments can be done using the form N245.
Warrant of Arrest
If a warrant of arrest is issued, then the police are sent to arrest the person and can either hold them in custody until they can be brought before a judge or they can be granted bail and given a date when they must attend the court.
Warrant of Execution
When debtors have failed to pay the CCJ and no variation orders have been made, bailiffs can go to property and acquire goods to the value of debt.
Any assets that come during an IVA or bankruptcy will go towards repaying the debt.
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