Debt Glossary

Advice and Assistance from Cohen Cramer

Debt Collection- Glossary

Debt –

money owed to a Creditor.

Creditor –

The person or business a Debt is owed to.

Debtor –

The person or business owing the Debt.

Assets –

These are items owned by the Debtor which may be utilised by the Creditor to enforce a Judgment i.e. car, property, paintings.

Default Notice –

A Creditor will issue this if the terms and conditions between the Creditor and Debtor are breached, i.e. the agreed payments have not been paid.

Letter of Claim-

A formal letter sent by the Creditor to the Debtor setting out the basis of the claim against them and indicating the consequences of failure to pay within a specified deadline (usually the issuing of Court proceedings).

Issuing of Court proceedings-

Action taken by the Creditor through the Courts to “sue” the Debtor for the unpaid Debt.

Limitation period –

This is the period of time during which a Creditor can seek to recover a Debt by the issuing of Court proceedings; this is usually 6 years from the date that the debt became outstanding.

County Court Judgment –

A Judgment entered by the Court against the Debtor following a successful claim having been pursued by the creditor. This may be following a final hearing or trial or at an earlier stage of the Court proceedings.

Default Judgment –

Judgment entered against the Debtor following a failure to respond to papers served in the Court proceedings.

Enforcement –

The process by which the Judgment ordered against a Debtor is enforced by the Creditor following failure to pay the sums due under the Judgment (other than the debtor simply making repayments). For example, registering a Charging Order over the Debtor’s property or instructing a Court bailiff to seize the Debtor’s Assets for sale at public auction.

Charging Order –

A charge registered at the Land Registry against the title to the Debtor’s property (or other Assets) to secure the Debt owed. When the Debtor comes to sell the property the Creditor should be repaid from the sale proceeds (subject to there being sufficient equity and payment of any prior charges).

Order for Sale –

A Court may grant an Order for sale of the Debtor’s property (once a Charging Order has been made). This will then release monies allowing the Creditor to be paid (again subject to the above caveats).

Bankruptcy –

This is ordered by the Court when a Debtor is not able to pay the debts owed to the Creditor.

Insolvency –

This relates to either a person or company where they are unable to pay back Debts owed to Creditors. They can either be balance sheet insolvent (i.e. do not have the money to pay debts) or cash-flow insolvent (i.e. have the assets, but not the appropriate form of payment).

Liquidation ‘winding up’ –

A company may be ‘wound up’ if it is no longer able to repay its Debts. All the business affairs will be terminated before the companies’ assets are sold to repay Debts to Creditors (subject to there being sufficient Assets).

Statutory Demand –

A formal demand served on the Debtor which allows the Creditor to start bankruptcy proceedings if the full amount of Debt (over £750) is not paid within 21 days.

Warrant of Execution –

If a Judgment is not paid, a Creditor can apply to the Court for a ‘warrant of execution’ which allows bailiffs to take items belonging to the Debtor and sell them to repay the Debt.

Attachment of Earnings –

The Court may order this as a way of repaying a debt due under a Judgment in instalments. Monies are deducted from the Debtor’s salary (by their employer) on a regular basis, usually monthly, and paid directly to the Creditor.

Company Voluntary Arrangement –

A legally binding agreement by which a Debtor agrees to pay a proportion of the Debt owed to its Creditors over a period of time, usually being 5 years. Failure to comply with the arrangement usually results in the company being wound up.

Individual Voluntary Arrangement –

A legally binding agreement by which a Debtor agrees to pay a proportion of the debt owed to its Creditors over a period of time, usually being 5 years. Failure to comply with the arrangement usually results in the Debtor being made bankrupt.

 

 

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