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Personal Insolvency Glossary

Jump Ahead: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A
Administration Order (County Court)
This is a County Court process permitting an individual to pay off a judgment debt which is less than £5,000 in affordable instalments. No insolvency practitioner is involved.

Authorised (Or Licensed) Insolvency Practitioner
The person (usually an accountant or solicitor) authorised by the Department of Trade and Industry (DTI) or a recognised professional body to act as a Trustee in bankruptcy or as the Nominee or Supervisor of a Voluntary Arrangement.

Annulment
This is the cancellation of a bankruptcy order by the Court. The effect of it is that the bankruptcy never occurred.

Assets
This is anything that belongs to the debtor that may be used to pay his/her debts. In bankruptcy any asset that is part of the bankruptcy remains a bankruptcy asset, even after discharge, unless specifically excluded or dealt with.

B
Bankruptcy Order
This is the court order making an individual bankrupt.

Bankruptcy Petition
This is a written application to Court by either a debtor or his creditors applying for an order to be made for the debtor to be made bankrupt.

Bankruptcy Restrictions Order Or Undertaking
A procedure whereby a bankrupt who has been dishonest or in some other 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.

Bond
Insurance cover needed by a person who acts as an insolvency practitioner.

C
Charging Order
This is an Order of Court that a creditor with a judgment debt can apply for and is registered against property in which the judgment debtor has in interest. This order places restrictions on the disposal of that property and it gives the creditor priority of payment over other creditors. Many orders require the payment of interest at the Court rate or above.

Composition
This is the agreement between a debtor and his creditors whereby the creditors agree to accept less than full payment in full satisfaction of their claim.

Creditor
Someone owed money by an individual.

D
Debt Consolidation
This usually refers to the process of obtaining a loan to pay off existing debt. The loan could be unsecured, secured or raised through re-mortgaging property.

Dividend
Any sum distributed to unsecured creditors in insolvency proceedings. All creditors receive the same percentage of the debt that they are owed.

E
Enterprise Act 2002
This is important legislation which has brought about wide-ranging changes to bankruptcy and other insolvency procedures.

Extortionate Credit Transaction
An extortionate credit transaction is a transaction by which credit is provided on terms that are exorbitant or grossly unfair compared with the risk accepted by the creditor. Such a transaction may be challenged by a Trustee in bankruptcy.

F
Fixed Charge
A fixed charge is a form of security granted over specific assets, preventing the debtor dealing with those assets without the consent of the secured creditor. It gives the secured creditor a first claim on the proceeds of sale, and the creditor can usually appoint a Receiver to realise the assets in the event of default.

Freehold Property
This is property in the form of land and buildings owned by an individual. This can be registered land (at the Land Registry) or unregistered.

G
Guarantee (of Payment)
This is a legal commitment to repay a debt if the original borrower fails to do so. It must be evidenced in writing for it to be enforceable.

I
Individual Voluntary Arrangement (IVA)
This is a statutory procedure where an individual, who cannot repay their debts, comes to an arrangement with their creditors on how their debt will be repaid. If 75% in value of creditors who vote agree to accept the offer made, all creditors are legally bound to accept it.

Insolvency
For an individual this is the state of not being able to pay one's debts as they fall due or having an excess of liabilities over assets.

Insolvency Act 1986
This is the primary legislation governing insolvency law and practice.

Insolvency Practitioner (IP)
This is a person authorised by either, The Insolvency Practitioners Association, The Institute of Chartered Accountants, The Institute of Certified Accountants, The Law Society, or the Department of Trade. The only person who may act as office holder in defined insolvency proceeding.

Insolvency Rules
These are a set of rules for Insolvency Practitioners that provide the detailed working procedures.

Interim Order
This is an Order of Court that an individual proposing a voluntary arrangement may apply for. If granted it prevents bankruptcy or other legal proceedings form being started or progressed against the individual whilst the order remains in force.

J
Judgement Debt
This is where the Court has agreed that a sum of money claimed in court action is due to the applicant.

L
Leasehold Property
Property owned by one party but let to another under a formal deed (the lease) which entitles that other person to occupy the property.

N
Nominee
This is an Insolvency Practitioner chosen by an individual to act in relation to their proposal for an Individual Voluntary Arrangement and who reports to the Court that the proposal conforms to the legislation and should be presented to the meeting of creditors.

O
Office Holder
This is a qualified insolvency practitioner that has taken the post of Supervisor of a voluntary arrangement or Trustee in bankruptcy in a particular case.

Official Receiver’s Office (O.R.)
The civil service body, a department of the DTI, whose responsibilities cover bankruptcies.

Onerous Property
The term onerous property in the context of a bankruptcy, applies to unprofitable contracts or to property that is unsaleable or not easily saleable or that might give rise to a continuing liability. Such property can be disclaimed by a Trustee in bankruptcy.

P
Petition
This is a written application to the court for relief or remedy.

Possession Order
An order made by the Court permitting a lender or landlord to take possession and evict any person living in the property.

Preference
This is an antecedent transaction in the six month to two year period preceding a bankruptcy. It places a creditor or a person connected with the insolvent, in a better position than they would have been otherwise. A Trustee in bankruptcy may recover any sums which are found to be preferences.

Preferential Creditor
This is a particular type of creditor that has priority when funds are distributed by a Trustee in bankruptcy. Under the current legislation the most common preferential creditors are employees who are owed wages or holiday pay.

Proof of Debt
The document submitted in an insolvency to establish a creditor's claim. In bankruptcy this is usually in the prescribed form but in voluntary arrangements can be informal (by a letter).

Proving
This is the process of lodging a proof of debt to make a claim in insolvency proceedings.

Proxy Form
This is a form that can be completed by a creditor if they wish someone else (or the Chairperson) to represent them at a creditors' meeting and may contain specific voting instructions

Proxy holder
The person authorised, by completed Proxy Form, to attend a (creditors’) meeting and vote on behalf of a creditor.

S
Secured Creditor
A creditor who has specific rights over some or all of a debtor's assets, a typical asset being a mortgaged property. They are paid first from the secured assets.

Security
This is a charge or mortgage taken out, over the assets of a borrower, by a lender, to secure the payment of a debt. If the debt is not paid, the lender has a right to take possession of and sell the charged assets.

Statement of Affairs
A document, which is completed by and sworn by a bankrupt, and states his or her assets and gives details of debts and creditors.

Statutory Demand
A legal notice, issued by a creditor, which requires the payment of a debt that exceeds £750 within a period of 21 days. The default of which can result in bankruptcy or liquidation proceedings being commenced without further notice.

Supervisor
The person appointed to supervise the implementation of the debtor's proposals for an IVA once approved by creditors.

Suspended Possession Order
The Court agrees to a possession order but also orders that the lender cannot evict the person living in the property for as long as that person keeps to an agreed payment schedule to clear the arrears and maintain future mortgage/rent payments.

T
Transaction At Undervalue
An antecedent transaction in the form of either a gift or a transaction in which the consideration received is significantly less than that given. In certain circumstances such a transaction can be challenged by an Administrator, a Liquidator or a Trustee in bankruptcy.

Trustee In Bankruptcy
The authorised insolvency practitioner appointed to deal with the estate of the bankrupt.

U
Unsecured Creditor
A creditor that does not hold security for their debt. (See above)

Undischarged Bankrupt
Someone against whom a bankruptcy order has been made and who has not been discharged from bankruptcy.