The Business Debt Advisor
Company debt solutions
Administration Order (County Court)
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 trustee, nominee, supervisor, liquidator, administrative receiver or administrator. Only such a person can hold any of these offices.
Cancellation usually of a bankruptcy
Anything that belongs to the debtor that may be used to pay his/her debts.
Associates of individuals include family members, relatives, partners and their relatives, employees, employers, trustees in certain trust relationships, and companies which the individual controls. Associates of companies include other companies under common control.
Someone against whom a bankruptcy order has been made and who has not been discharged from bankruptcy.
The court order making an individual bankrupt.
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 introduced on 1 April 2004 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.
Bankruptcy or Sequestration
Bankruptcy or Sequestration is a legal order which confirms to your creditors you are unable to repay the money you have borrowed. It involves you agreeing to pay what you can afford for 48 months and your Trustee gathering in your assets which are not excluded. These assets are turned into cash to cover the costs of bankruptcy and your debts.
Insurance cover needed by a person who acts as an insolvency practitioner.
Bankruptcy Restriction Order “BRO”
A BRO is an order that can be made against you when you have been made bankrupt and it is found that your behaviour prior to bankruptcy is dishonest, reckless or fraudulent.
A BRO can extend certain restriction of bankruptcy for up to 15 years.
Bankruptcy Restriction Undertaking
If you are facing a BRO, see above, you can agree to an undertaking to avoid a formal court hearing. and the court hearing,
For example mortgage or secured loan. Monies or some other consideration are granted to the lender on condition that the borrower provides security against their property.
A creditor with a judgment debt can apply to Court for an order 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.
An agreement between debtor and his creditors whereby the creditors agree to accept less than full payment in full satisfaction of their claim.
County Court Judgement “CCJ”
CCJ is a ‘County Court Judgment’. It is an order made by the court against someone who owes money (defendant) to another person or company (claimant). The judgment is entered on the ‘Register of Judgments, Orders and Fines’. Judgments can be enforced by Enforcement Officers who could take away your possessions, or by an attachment to your earnings or by securing the debt on your property – which is a charging order.
Someone owed money by an individual or company.
A creditors’ committee is formed to represent the interests of all creditors in supervising the activities of a trustee in bankruptcy. A committee can only be formed to assist a Supervisor of an individual voluntary arrangement although this is rare.
Debt Arrangement Scheme “DAS” (Scotland Only)
DAS is a government managed solution which allows you to repay your debts through a debt payment programme (DPP). The DPP will allow you to pay off your debts over an extended period of time while giving you protection from your creditors taking action against you to recover the debt in the DPP.
Usually refers to obtaining a loan to pay off existing debt. The loan could be unsecured, secured or raised through remortgaging property.
Debt Relief Order “DRO”
A Debt Relief Order is an official order granted by the official receiver that if approved will freeze your debts, interest and creditor recovery procedures for a period of 12 months. If after 12 months your situation has not changed then any unsecured debts will be written off.
Debt Relief Restriction Orders “DRRO”
If the Official Receiver finds you have acted dishonestly prior to making a Debt Relief Order (DRO) application or you have acted against the rules when you applied for a DRO, they can apply for a DRRO to be made against you.
A person who conducts the affairs of a company.
The time that someone who is bankrupt will remain bankrupt.
A procedure whereby a person has a court order made against them or gives an undertaking to the Secretary of State which makes it an offence for that person to be involved in the management or directorship of a company for the period specified in the order (unless leave has been granted by the court).
Disqualification of Directors
A director found to have conducted the affairs of an insolvent company in an “unfit” manner may be disqualified, on application to the court by the DTI , from holding any management position in a company for between 2 and 15 years.
Any sum distributed to unsecured creditors in an insolvency.
A person who receives a salary or wage for services rendered to a business or organisation.
Enforcement Agent (BAILIFF)
An enforcement agent (bailiff) is an individual who has a legal power to collect certain debts by either asking you to pay what you owe or taking and selling your belongings to raise the money.
Enterprise Act 2002
Legislation which has brought about wide changes to the law relating 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 an administrator, a liquidator or a trustee in bankruptcy.
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.
Property owned by an individual which is not leased.
Full and Final Settlement
An agreement with your creditors where they agree to receive a certain sum of money in settlement of all monies or obligations that you owe to them. An IVA could be a full and final settlement. Settlements agreed informally are referred to as discounted settlements.
Basis on which insolvency practitioners prefer to sell a business. Effectively it means the business continues, jobs are saved, and a higher price is obtained.
A legal commitment to repay a debt if the original borrower fails to do so. Directors may give guarantees to banks in return for the bank giving finance to their companies. It must be evidenced in writing for it to be enforceable.
Individual Voluntary Arrangement (IVA)
A procedure where an individual who cannot repay their debt comes to an arrangement with their creditors on how their debt will be repaid.
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 (IA 1986)
Primary legislation governing insolvency law and practice. Nevertheless, many other statues and statutory instruments are also relevant.
Insolvency Act 2000
A company goes into insolvent liquidation if it goes into liquidation at a time when assets are insufficient for the payment of its debts and other liabilities and the expenses of liquidation.
Insolvency Practitioner (IP)
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 an insolvency proceeding.
The Insolvency Rules 1986, 2000 and? as amended, provide the detailed working procedures for the provisions of the Insolvency Act 1986.
Insolvency Services Account
An account maintained at the Bank of England by the Department of Trade and Industry, through which funds must be passed in compulsory liquidations and bankruptcies.
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.
This is either a recognition of a debt by a court or a decision given by a court at the conclusion of a trial.
Property owned by a landlord and which is rented or leased to the person entitled to occupy the property.
Usually refers to a bank or a financial institution that lends money to individuals to buy properties. The lender will then take a charge on the property as security.
A person who has agreed to be, and is registered as, a member, such as a shareholder of a limited company.
A transfer of an interest in land or other property by way of security, redeemable upon performing the condition of paying a given sum of money.
Steps a mortgage lender can take if you end up with arrears on your mortgage and you fail to come to an arrangement to clear your arrears.
The person chosen by the individual to act on your behalf and help you put together proposals for an Individual Voluntary Arrangement “IVA” and who liaises with creditors to seek their agreement to the IVA.
A person who is required to be a qualified insolvency practitioner to hold the following posts, of a liquidator, provisional liquidator, administrator , administrative receiver, supervisor of a voluntary arrangement, or trustee in bankruptcy.
Officer (Of A Company)
A director or secretary of a company.
Official Receiver (Or)
The civil servant employed by the Department of Business Innovation and Skills to head the regional offices whose teams’ responsibilities cover bankruptcies and compulsory liquidations.
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.
Partnership Voluntary Arrangement
The term used informally to describe the voluntary arrangement procedure as applied to partnerships under the provisions of The Insolvency Partnerships Order 1994 as amended.
A written application to the court for relief or remedy.
An order made by the Court permitting a lender or landlord to evict the person living in the property.
A payment or other transaction in the six month to two year period preceding a liquidation, administration or bankruptcy, which places a creditor or a person connected with the insolvent, in a better position than they would have been otherwise. A liquidator, administrator or trustee in bankruptcy may recover any sums which are found to be preferences.
Defined in Schedule 6 of The Insolvency Act 1986. A preferential creditors receives monies in priority to unsecured creditors when funds are distributed by a liquidator, administrative receiver or trustee in bankruptcy or a Supervisor of a voluntary arrangement. The Insolvency Act 2000 amended the status of the Inland Revenue and HM Customs & Excise who no longer have preferential status.
Proof of Debt
The document submitted in an insolvency to establish a creditor’s claim. It may be informal (by e.g. letter) or in a prescribed form (in bankruptcy and compulsory liquidations).
A creditor who claims is referred to as “proving” for his debt, and the document by which he seeks to establish his claim is his “proof”.
The authority given by a creditor to another person (proxy holder) to represent the creditor, either in person or by submitting the proxy form at a meeting of creditors.
Form that must be completed if a creditor wishes someone else to represent him or her at a creditors’ meeting and vote on his or her behalf.
A person who is authorised to attend a meeting on behalf of someone else.
In bankruptcy proceedings, the Official Receiver may at any time apply to the court to question the bankrupt about his affairs and assets.
Realising an asset means selling it or disposing of it to raise money, for example to sell an insolvent’s assets and obtain the proceeds.
Recognised Professional Body (RPB)
An organisation approved by the Secretary of State as being able to authorise its members to act as insolvency practitioners.
A body may be recognised if it regulates the practice of a profession and maintains and enforces rules for securing that such of its members as are permitted by or under the rules to act as insolvency practitioners-
(a) are fit and proper persons so to act, and
(b) meet acceptable requirements as to education and practical training and experience.
The process by which the Official Receiver or an Insolvency Practitioner is discharged from the liabilities of office as trustee/liquidator or administrator.
The commencement date of the insolvency proceedings.
A procedure that cancels a winding-up order.
Scottish Debt Solutions
If you live in Scotland there are a range of different Debt Solutions available. These are different to the solutions available for individuals who live in England, Wales and Northern Ireland.
Scottish Trust Deeds and Protected Trust Deeds “PTD”
A Trust Deed is a formal binding agreement between you and your creditors. The proposal normally provides for you to make monthly contributions over a pre-agreed period of time, which is usually a minimum of 4 years. You are protected from creditor action and interest and charges accruing from the date of approval. Monthly payments will be based on what you can afford. Any debts remaining at the end of the period of the Trust Deed are written off.
Secretary Of State
The Secretary of State is responsible for strategy and policy across the Department for Business, Innovation & Skills (BIS).
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 charge or mortgage over assets taken to secure payment of a debt. If the debt is not paid, the lender has a right to sell the charged assets. Security documents can be very complex. The most common example is a mortgage over a property.
A special manager is a person appointed by the Court in a compulsory liquidation or bankruptcy to assist the liquidator, official receiver or trustee in managing the insolvent’s business. He does not need to be an insolvency practitioner.
Statement of Affairs
A document which sets out the assets and debts for individuals, partnerships or for limited companies. These documents sometimes needs to be sworn but recent changes to insolvency law allow the statements to be confirmed as true by a simple signature.
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.
Statute Barred Debt
Statute barred debt refers to a debt that’s not enforceable because the time a creditor has to chase payment has passed. This is outlined under the Limitation Act 1980.
The person appointed to supervise the implementation of the debtor’s proposals for an IVA or CVA once approved by creditors (and members).
Suspended Possession Order
The Court agree to give a possession order to a lender which normally will not allow them to repossess the property as long as the person who has agreed the order keeps to an agreed payment schedule to clear any arrears that have arisen and maintain future mortgage/rent payments.
Transaction At Undervalue
A transaction at an undervalue can describe 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.
(a) in bankruptcy – the authorized insolvency practitioner appointed to deal with the estate of the bankrupt;
(b) under a deed of arrangement – the authorized insolvency practitioner appointed to deal with the estate of the person who entered into the deed.
Strictly, any creditor who does not hold security. More commonly used to refer to any ordinary creditor who has no preferential rights, although, in fact preferential creditors will almost always also be unsecured. In any event, the last in the queue, ahead only of the shareholders.
Someone against whom a bankruptcy order has been made and who has not been discharged from bankruptcy.
Vat Bad Debt Relief
The relief obtained in respect of the VAT element of an unpaid debt. Previously available only when the debtor became insolvent, relief is now available on any debt unpaid for more than 6 months.
(Or liquidation) – the procedure whereby the assets of a company (or partnership) are gathered in and realised, the liabilities met and the surplus, if any, distributed to members.
The order made by the court for a company or partnership business to be liquidated.
A winding-up petition is a petition presented to the court seeking an order that a company be put into compulsory liquidation.
Applied to companies in liquidation where a director allowed the company to continue trading in circumstances where he should have concluded that there was no reasonable prospect that the company would avoid going into solvent liquidation. The directors involved may be made personally liable to make a contribution to the company’s assets.
The above information is designed to provide general information only. While every effort has been made to ensure that the information provided is accurate, it is not a full and authoritative statement of the law and you should not rely on it as such.