Are you having Debt Recovery Issues but struggling to make your way through the mind field of legal jargon?

We are here to help. We have created a glossary of words, phrases and terms our solicitors use when dealing with your case, to help you better understand the process and feel more at ease when our solicitors use them in your meetings.

Administration Order: Order of a Court appointing an Administrator to control the affairs of a company at the request of the company, directors, or a creditor where that company is or is unlikely to become insolvent.

Administrator: The insolvency practitioner appointed further to an administration order to deal with an insolvent company’s affairs. An administrator may carry on the company’s business and/or realise any of the company’s assets with a view to rescuing the company as a going concern or achieving a better result for creditors than would be possible with a liquidation.

Alternative dispute resolution:  Ways of resolving disputes without going to Court. This includes mediation, arbitration, negotiation, conciliation and adjudication.

Application: During a court claim, either party may make specific applications to the court to deal with interim issues.

Arbitration: A procedure whereby a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a decision on the dispute.

Arbitrator: An independent person or body that is officially appointed to settle a dispute.

Arrears: Monies owed by debtors that are overdue for payment.

Assets: Property (tangible and intangible) owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.

Attachment of Earnings: A method of enforcement of a judgment. A creditor is entitled to ask a court to order that an employer deduct a set amount from the debtor’s wages until the debt has been discharged. Does not apply to sole traders.

Bailiffs: An employee of the County Court, the bailiff can be employed by a creditor to take away a debtor’s possessions in satisfaction of a judgment debt.

Bankruptcy: a form of insolvency affecting individuals and partnerships. It can be initiated by either the individual or by his creditors when it becomes apparent they cannot pay their debts as they fall due.

Bankruptcy restriction order: Before an individual can be discharged from his bankruptcy, they must follow certain rules which are defined as ‘restrictions’. If the Official Receiver determines that the debtor has breached these rules, they may request that a Bankruptcy Restriction Order is made against the debtor.

Breach of contract: Acting in a way that breaks the terms set out in a contract.

Charging Orders: Common method of enforcement of a judgment where the debtor owns property. A successful application for a ‘charge’ against the debtor’s property will turn the unsecured judgment debt into a secured debt. A charging order allows a creditor to make an application for an order for sale of the property, although the granting of such is at the discretion of the court.

Civil Procedure Rules: Set of rules that govern the civil procedure used by courts in civil cases in England and Wales.

Claimant: A person or other entity initiating a court claim. Formerly known as a plaintiff.

Companies House: The registrar for all UK companies and an executive agency of the UK Government.

Company: Legal entity controlled by identifiable persons which exists for an industrial or commercial purpose. All UK companies are registered at Companies House.

Company Voluntary arrangement: Company Voluntary Arrangement or CVA is a voluntary procedure by which an insolvent company submits a plan to its creditors and shareholders that will act in satisfaction of the debt it owes.

Compulsory Liquidation: Compulsory Liquidation occurs where the court orders the liquidation of an insolvent company.

Conciliation: Way of attempting to resolve a dispute, outside of Court proceedings.

Contract: Binding agreement between one or more parties, which can be written, verbal or by conduct.

County Court: The County Court is the first level court system within England and Wales that deals with disputes with unlimited financial jurisdiction. County Courts do not share the same boundaries as counties and instead can cover disputes involving parties located over a large geographical area.

Court-appointed receiver: A Court-appointed receiver is a person appointed by the court to take charge of the assets of a company. This action tends to be taken when the assets are subject to a legal dispute and there is a risk that the assets may be destroyed or dissipated.

Creditor: Person or other entity who is owed monies.

Creditors Voluntary Liquidation (CVL): A Creditors’ Voluntary Liquidation (CVL) is a procedure whereby the shareholders of a company decide to put the company into liquidation. A CVL only applies to the insolvency of a limited company. In a CVL, the assets of the company are sold and the realisation of this is distributed between the creditors before the company is dissolved.

Debenture: A debenture is a long-term loan that is secured against a company’s assets. The term most commonly denotes a document which creates a fixed charge over the assets not traded in the ordinary course of business, and a floating charge against the remainder of the company’s assets. The creditor who is granted a debenture is given similar rights to a mortgagee.

Debt Recovery: The process by which a creditor will try to recover monies owed to them by a debtor. There are many different methods of recovering debts, dependent on whether the creditor and/or debtor is an individual, company or other organisation.

Debtor: Person, country, or organization that owes money.

Defendant: Person or other entity defending a court claim.

Damages: Sum of money claimed or awarded to compensate for a loss or an injury.

Default judgment: Judgement entered against a party who has failed to defend against a claim that has been brought by another party.

Enforcement: Process to elicit the payment of a judgment debt. Enforcement can include charging orders, attachment of earnings, third party debt orders and insolvency proceedings.

Fixed Charge: Where a creditor has ‘loaned’ monies to a company, it may wish to take a “fixed charge” over a specific asset. The asset is then “signed over” to the lender so the debtor cannot do anything with the asset without the permission of the lender.

Floating Charge: Similar to fixed charges, a Floating Charge is a security afforded to a lender over assets that are constantly changing in identity and value (such as stock, cash, fixtures, and fittings etc.). Floating Charges are mainly associated with companies and not individuals.

Freezing Order: A freezing order (formally known as Mareva Injunction) is a court order that prevents parties disposing of their assets during legal proceedings.

Guarantee: A guarantee is a commitment that a third party will repay a debt in the event that the original borrower fails to do so.

High Court: Her Majesty’s High Court of Justice in England is one of the senior courts of England and Wales. The High Court is a court of unlimited civil jurisdiction and comprises three separate divisions: the Queen’s Bench, Chancery, and the Family Division. The High Court generally deals with higher value claims than the County Court.

High Court Enforcement Officer: Private individual or company, licensed to work under High Court Writs to recover money and possessions from a debtor. Similar to a bailiff but can only act on debts of £600 or more.

Individual Voluntary Arrangement (IVA): Legally binding arrangement supervised by a licensed Insolvency Practitioner. The purpose of an IVA, similar in nature to a CVA, is to enable an individual to reach a compromise with their creditors and avoid the consequences of bankruptcy.

Injunction: Court order that prevents a party from doing something, or compels a party to do something

Insolvency: Insolvency is the condition of having insufficient assets with which to discharge debts and liabilities. In short, the debtor is unable to pay their debts as they fall due.

Insolvency Rules: The Insolvency Rules 1986 are a statutory instrument that sets out the detailed working procedures for the provisions of the Insolvency Act 1986.

Insolvency Practitioner: Individual who is licensed and authorised to act in relation to the affairs of an insolvent individual, partnership, or company.

Interim Order: Order that will stay in place until it is either made final at a hearing or set aside (by the court or by consent).

Judgment: A final decision by a court or other tribunal.

Jurisdiction: The geographical area that a given set of laws govern. In a contract, parties will generally agree which court system will oversee any dispute that may arise. This does not have to be the country/area that the contract is performed, or where the parties are based.

Late Payment of Commercial Debts (Interest) Act 1998: Piece of legislation that was introduced to give businesses a statutory right to claim interest from other businesses for the late payment of commercial debts.

Letter Before Action: Letter Before Action (also known as a letter before claim) is generally seen as the last letter sent by a creditor to a debtor before legal action is taken to recover a debt.

Licensed Insolvency Practitioner (IP): A Licensed Insolvency Practitioner (IP) is a professional individual licensed to act for insolvent individuals and businesses. IP’s can advise on, and undertake appointments, in all formal insolvency procedures.

Lien: A right of possession in property that can be retained until a debt has been discharged.

Limitation period: The maximum period/last date in which a legal action can be brought or a right enforced. This is governed by the Limitation Act 1980.

Limited Liability Partnership: A Limited Liability Partnership, or LLP, is a partnership that limits the liabilities of the partners. It is similar in make up to a company.

Liquidation: The process of bringing a company to an end and distributing its assets to Claimants.

Liquidator: A liquidator is an insolvency practitioner who is appointed to manage the liquidation of an insolvent company.

Litigant in person: An unrepresented party in a legal action (i.e., has not instructed a solicitor or barrister).

Litigation service: Actions between two opposing parties working in the interest of enforcing or defending a legal right.

Mediation: A form of Alternative Dispute Resolution (ADR) that is both voluntary and confidential. Generally conducted by a trained mediator, mediation is a process designed to reach a mutually acceptable resolution without the need for a formal court decision.

Members Voluntary Liquidation: Voluntary procedure to liquidate a solvent company. The company must be able to show that it can pay all of its liabilities in full, plus statutory interest and the costs of the liquidation within 12 months.

Negotiation: A discussion between parties with the aim to reach an agreement.

Nominee: A nominee is a person or entity named or appointed by another (the nominator) to act on its behalf in a limited capacity or in a specific matter.

Official Receiver: An officer of the Insolvency Service. They deal with the first stage of bankruptcies and companies wound up by a court. Their responsibilities include collecting and protecting assets for the benefit of creditors, finding out the reasons for the insolvency and acting as trustee or liquidator where no insolvency practitioner has been appointed.

Order to Attend: An order to attend court for questioning is not a method of enforcement of a judgment. However, it can be used to gain knowledge about a debtor’s assets and employment so that a method of enforcement can be used. The court will summon the debtor to appear at court and answer selected questions.

Partnership Voluntary Arrangement (PVA): Similar to a CVA but applied to partnerships rather than a company.

Payment Plan: A plan entered into with a debtor that allows for the repayment of a debt over a prescribed period of time. Often used in situations where a debtor is struggling to pay their debts and the creditor is prepared to allow the debtor some time to repay what they owe without the need for legal action.

Petition: Formal written application to the court for relief or remedy. In the context of insolvency, creditors can often petition for an individual’s bankruptcy or seek to wind up a company.

Pre-action Protocol: Contained within the Civil Procedure Rules and sets out what creditors should deal with before initiating court proceedings. At present, there is not a specific guide for debt claims between companies, but creditors are expected to comply with the general protocol and the spirit of it. There is a pre-action protocol for debt claims between a business and a consumer known as the Pre-Action Protocol for Debt Claims.

Proof of Debt: Document submitted by a creditor in an insolvency to give details of their claim.

Retention Money: On long term projects, such as construction projects, there is usually a clause providing for a percentage of the contractual price to be retained until the project is complete (“the retention clause”). The retention clause can also apply pending checks to ensure the services provided comply with the requirements.

Retention of Title: Term within a sale or supply of goods contract which states that the title to such goods remains vested in the seller until certain obligations are satisfied by the buyer, which is usually payment of the purchase price.

Secured Creditor: A creditor whose interest in some or all of the debtor’s assets is secured against the debtor’s property. In the event of default, the creditor may have entitlement to take possession of those assets. If a debtor goes insolvent, the secured creditor will get priority over unsecured creditors when proceeds of the sale of the asset are distributed.

Security: Refers to an asset belonging to a debtor in which a creditor has an interest as a way of guaranteeing repayment of a debt (such as a charge over a property). In the event of the debtor’s default, the creditor may have entitlement to take possession of the secured asset.

Set Aside Application: If a judgment has been made against a debtor and they dispute this, they can make an application to court to set aside the judgment. There are various grounds that the debtor must satisfy in order to get the judgment set aside and the creditor is entitled to resist the application if they think it is wise to. A successful set aside application will ‘turn the clock back’ on proceedings and put the case back to where it was before judgment was obtained.

Service: The act of sending documents, including Court documents, to the parties in a dispute.

Shareholders: A person or other entity that owns shares in a company. Shareholders have a range of powers including the right to remove the board of directors, change the company constitution or wind up the company amongst others.

Small Claims Mediation Service: A free service offered by the civil courts (in small claims matter) to try and facilitate a settlement without the need for a formal hearing. The Small Claims Mediation Service, if accepted by both parties, will offer a telephone mediation service generally lasting about an hour where the parties are expected to narrow the issues and agree a settlement, which is binding.

Statutory Demand: A formal demand for payment of an undisputed debt. The demand requires payment of the debt (which must exceed the sum of £750 in respect of companies, £5,000 in respect of individuals) within 21 days, failing which a bankruptcy petition or winding-up petition maybe presented.

Stay: A hold on proceedings.

Strike out: The act of a Court dismissing a claim without hearing evidence at trial.

Summary judgment: Procedure which any of the parties to a claim, or the court, can use to dispose of all or part of a case without a trial when certain circumstances are met, without hearing evidence.

Third Party Debt Officer: A method of enforcement for a judgment. A creditor is entitled to seek payment of a judgment debt from a third party, if that third party owes the debtor monies. Generally, this means applying to court for an order that a bank release money in accounts held for the debtor to the value of the debt.

Undisputed Debts: Any amount that the debtor has not contested in writing to the creditor specifying the reason(s) why the payments are disputed.

Unsecured Creditor: A creditor who does not have the benefit of any security over the debtor’s assets. Unsecured Creditors are paid on a pro-rata basis once claims of all secured creditors have been satisfied.

Voluntary Agreements: There are two types of voluntary arrangements: Individual Voluntary Arrangements (IVA) and Company Voluntary Arrangements (CVA). An IVA is a procedure allowing an individual with debt problems to reach a voluntary agreement with creditors to repay all or part of its debts over an agreed period of time. An IVA can only be administered by an insolvency practitioner and offers a formal alternative for individuals wishing to avoid bankruptcy. An IVA usually (but not always) comprises only the claims of unsecured creditors, leaving the rights of secured creditors largely unchanged. A CVA is a procedure allowing a company that is insolvent or with debt problems to reach a voluntary agreement with its creditors to repay all or part of its debts over an agreed period of time. Only an insolvency practitioner can supervise a CVA. An insolvency practitioner will draft a proposal to the creditors of the company, who in turn can vote on whether or not to accept the proposal.

Voluntary liquidation: There are two types of voluntary liquidations: Creditors’ Voluntary Liquidation and Members’ Voluntary Liquidation. Creditors’ Voluntary Liquidation (CVL) – where the shareholders of an insolvent company decide to put the company into liquidation. If there are not enough assets in the company to pay all the creditors, the company is considered insolvent. A CVL is under the effective control of the creditors, who can choose the liquidator. The liquidator is an insolvency practitioner. Members’ Voluntary Liquidation – where the shareholders of a solvent company decide to put it into liquidation. A statutory declaration must be given which provides that there are enough assets in the Company to pay all the debts of the company. The liquidator is an insolvency practitioner.

Winding-Up: The process of dissolving a company. This is done by collecting all assets of the company, satisfying the creditors’ claims and other liabilities, and then distributing any remaining assets to the shareholders. See also Liquidation.

Winding-Up Order: An order made by the court for a company to be placed in compulsory liquidation. This is usually made following a formal winding-up petition issued by a creditor.

Winding-Up Petition: A legal document presented to the court seeking an order that a company be put into compulsory liquidation.

Without prejudice: A discussion or correspondence between parties with a view to settling the claim, which is prevented from being presented to the Court during the trial.