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Glossary of IVA and Debt Terms

A glossary of terms relating to Individual Voluntary Arrangements and personal finance in general.

Administration Order

A County Court process which allows an individual with minor debts to pay off what they owe. Debt repayments are made directly to the court who administer the order and distribute the payment to the individuals creditors.

Bankruptcy

A legally declared inability of debtors to repay the money they owe. Creditors may file a bankruptcy petition against a debtor in an effort to recoup a portion of what they are owed.

Bankruptcy Petition

A formal document issued to the court either by a person in debt or by their creditors. The petition sets out the amount of the debt due and the reasons why a bankruptcy order is being sought.

Consolidation Loan

Allows a borrower to combine a number of existing debts into one loan. Consolidation loans are used to reduce interest payments on the debt and/or lower monthly repayments.

Citizens Advice Bureau

An organisation which provides free advice to the public about a wide range of subjects including those related to debt and financial problems. The Citizens Advice Bureau has offices throughout the UK.

Creditor

An individual or organisation to which money is owed by a debtor.

Credit History

A record of how an individual has paid their past and existing debts. A persons credit history is used to establish their credit rating.

Credit Rating

An evaluation of a persons ability to manage debt based on an analysis of their credit history.

Debt

Money that has been borrowed and is to be repaid either immediately or at a future date.

Debt Consolidation

Debt Consolidation is a method for easier management of debt repayments. Rather than make multiple separate monthly repayments the debtor groups their debts together into one single regular repayment. Methods for debt consolidation include Individual Voluntary Arrangements, debt management plans and consolidation loans.

Debt Management

An informal arrangement made between creditors and debtors designed to overcome difficulties in the repayment of the debt. Debt Management Plans are usually arranged via a commercial debt management company of the Citizens Advice Bureau.

Debtor

A debtor is someone who owes money and makes payments to a creditor.

Disposable Income

Can be defined as the amount of a persons income after taxes have been paid. Sometimes monthly expenses such as utility bills, mortgage repayments etc are also included in disposable income calculations.

Gross Income

A persons salary plus any additional bonuses and benefits such as income from shares.

Individual Voluntary Arrangement (IVA)

Individual Voluntary Arrangements were introduced in the UK as an alternative to bankruptcy. They provide a framework for working with creditors to reach a mutually beneficial solution to an individuals debt problems without the need for bankruptcy.

Inland Revenue

The UK government department responsible for the collection of direct taxes such as income tax.

Insolvency Practitioner (IP)

An Insolvency Practitioner is a specialist who is authorised to act on insolvency cases. They are able to advise people with regard to their financial problems. An IP is authorised by a professional organisation such as the Insolvency Practitioners Association or one of the chartered accountancy bodies

Interest Rate

The amount a creditor charges a borrower for a loan. The interest rate is the percentage of the loan to be paid back over the amount of the original loan.

Interim Order

A person who intends to put forward an IVA proposal to their creditors may apply to the court for an interim order which will stop bankruptcy and other legal proceedings whilst the order is in place.

Lump Sum

An amount of money to be paid in a single instalment.

Secured Debt

A debt where the creditor holds the debtors property or other assets as collateral. If the borrower is unable or unwilling to repay the debt the lender may sell the property to recover the money owed.

Sole Trader

A person who owns and runs a business and who is personally liable for all debts incurred in the running of the business.

Unsecured Debt

A debt is unsecured if it is not guaranteed against the property or assets of the debtor. Examples of unsecured debt include money owed on credit cards and medical bills.

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Total unsecured debt : £4000



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