One of the most distressing
aspects of being in debt is feeling that you
are out of control. This sense of helplessness
can be increased by the jargon used in the
financial industry. If you don't understand
what your creditors (lenders) are saying to
you, how can you hope to negotiate with them
to reach an agreement?
Jargon buster may help you cut
through the red tape.
Administration
Order May apply if you have at least one County Court Judgement
against you and total debts do not exceed £5,000. It allows
a County Court to administer payments to all your creditors. One
payment is made to the court and the court splits this between all
creditors according to how much you owe. As long as an order is
in force, creditors cannot take further enforcement action and interest
is stopped.
Attachment
of Earnings Order If you fail to pay money as ordered in a County
Court Judgement, the creditor can apply to the court to have money
deducted from your wages. Deductions are made at the rate of payment
decided by the court as reasonable. (Attachment of Earnings Orders
for Council Tax are dealt with by the Magistrates Court under a
different system.)
Bailiffs
Cannot use force to gain entry to a property. Walking in through
an unlocked door or climbing in through a window is acceptable,
however. Forcing their way past someone at the door is not acceptable.
The only exception is bailiffs acting for the Inspector of Taxes
who can apply for a warrant to force entry (but this is rare). Once
inside they can use force to open other doors and can return to
the property again (using force if needed).
More Info
Bankruptcy
A procedure which writes off all debts (with a few exceptions).
You or one of your creditors can petition for bankruptcy. The debt
is usually discharged after two to three years. However, if there
is any equity in a bankrupt's home or other assets, they will usually
be sold to repay debts.
More Info
County
Court Claim (Previously called a County Court Summons.) This
is a formal document sent to you by the court when a creditor has
begun legal proceeding. It must be dealt with within 14 days. Ignoring
the claim will result in a Judgement being registered by default
and an order to pay the whole amount immediately.
County
Court Judgement Following a County Court Claim, if the figure
is not disputed, or the case is unsuccessfully defended, the court
will enter a judgement. This is usually for payment by installment
or the entire sum to be paid immediately. A judgement may be set
aside, varied and suspended on application to the court. Judgements
are registered publicly with Registry Trust and held for six years.
More Info
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 offer the credit.
Credit
Repair A number of organisations have claimed that, for a
fee, they can remove County Court Judgements, so making it easier
for people to obtain credit. This is normally done by advising people
to apply to have the judgement set aside on (usually) false grounds.
A number of credit repair companies have been prosecuted and one
proprietor was jailed for conspiracy to defraud the public.
More Info
Debt
Management Plan (DMP) allows you to make reduced repayments
to your lenders (creditors) over a number of years. Payments are
made until the debt is cleared in full or until you are able to
make the full repayments again. The repayments are based on what
you can afford after a realistic income
and expenditure has been drawn up.
More
Info
Deduction
from Earnings An order made by the Child Support Agency to
make deductions for maintenance. No court order is necessary (unlike
an Attachment of Earnings Order).
Default
Notice Must be issued by a creditor before he can start legal
action to recover a debt. It states the amount of money owing and
the amount required from the debtor to put things right. It asks
for payment in full in seven days. If the seven days pass without
payment, the creditor can take court action.
More Info
Individual
Voluntary Arrangement An alternative to bankruptcy. An IVA
is a formal proposal, made on behalf of the debtor by a registered
insolvency practitioner, to pay creditors part or all of a debt
over a set period of time.
More Info
Joint
and Several Liability If more than one person enters into
a credit agreement then both are liable for the full amount. For
example, after divorce or separation, both parties can be pursued
for the outstanding amount. This also applies to rent arrears on
joint tenancies, arrears on joint mortgages, Council Tax payment
and water rates on properties that have been jointly occupied.
More Info
Liability
Order If you fail to pay your Council Tax, your local authority
can apply to the Magistrates Court for a Liability Order. The Order
gives the council extra powers to enforce collection of the money.
Non-priority
Creditors Non-payments to these creditors (sometimes known
as secondary creditors) would incur less severe consequences than
the non-payment of priority creditors (see below).
Priority
Creditors 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.
Secured
Lending A loan where security is given by the person borrowing
(the security is usually property). If you fail to repay a secured
loan the property maybe repossessed. These debts take priority over
unsecured lending.
Statutory
Demand A formal legal document requiring a debtor to pay
off an outstanding debt or secure it against property otherwise
the creditor will bankrupt the debtor. Ignoring a Statutory Demand
allows the creditor to start bankruptcy proceedings.
More
Info
Surplus
Income This is the amount of money left over after paying
essential expenditure (such as mortgage, housekeeping etc) but before
making any credit repayments. If this is a negative amount, it is
known as a deficit.
Time
Order Allows a County Court to make changes to the terms
of a regulated agreement, if it appears to be just. The court can
reduce the repayment rate and the interest rate. Time Orders are
normally only made where there is a temporary financial difficulty
and if you are likely to be able to return to making full contractual
payments.
Unsecured Lending Is not secured
on a property by way of a legal charge and
where the rights of the creditor extend only
to recovering any money owed.
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