Legal terms can be confusing at the best of times, so we’ve gathered together a quick glossary of legal, financial and insolvency terms that you may hear from a debt collector, lawyer, or from a court. You’ll find the meanings of each word directly next to them, and the list is in alphabetical order.

Administration: When a company is in “administration”, it is usually because if they have fallen into financial difficulties. Depending on the outcome of this administration, the company may close down.

Acquiescence: Action or inaction which legally binds someone. 

Arrears: This term is used when someone has not paid any invoices or made payments on their debts.

Asset: An asset is something owd by an individual that holds some value; should you attempt to sell it.

Bankruptcy: An option that can be used if a person cannot pay their debts when they are due, or they owe more money than they own. Bankruptcy affects your credit rating.

CCJ: A County Court Judgment where a company or individual can take you to court because you have not paid a debt.

Credit Rating: A system that all financial service providers use to assess how likely someone is to be able to make repayments on any financial products (such as loans and mortgages). If someone happens to have a good rating, they are more likely to have their application accepted.

Codicil: Written amendment to an existing will.

Collateral: Property committed to guarantee a loan.

Domino effect: If an individual partner has an insolvency problem, and is being pursued by a creditor, this can lead to other issues. It is possible for the spouse of the partner to become insolvent, too, thus leading to the loss of other assets.

Fiduciary: A person who exercises rights and powers for the benefit of another person. 

Fixed and Floating Charge: A mortgage or other security documentation that is likely to create charges over particular assets as security. A floating charge is related to the assets and material subject to change on a day to day basis. A floating charge is not as effective as a fixed charge but is much more flexible.

Garnishee: (now known as the Third Party Debt Order) A person who owes a third party a debt, such as a bank.

Hearsay: Evidence that a witness does not have direct knowledge of, but which is based on what others have said. 

HMRC: Her Majesty’s Revenue and Customs. Responsible for income tax, self-employment assessment, and National Insurance.

Insolvent: A term that is used when a company or an individual cannot cover their debts with the assets or funds they hold.

Joint Several Liability: Joint and Several Liability implies that all members of the agreement are liable for the partnership debts, dependent on their ability to pay. Creditors may, therefore, choose who to target for repayments.

Liability: Something that you owe to somebody; for example, a mortgage, or a credit card repayment.

Order: Formal written direction by a judge.

That’s all for now. Hopefully that gives you a good starting point to understand the world of finance and debt collection, and what some of those confusing terms mean. We’ll be back with more definitions in the future, so if there is anything you’re not sure about, please do let us know! In the meantime, if you need any help, support or just advice about collecting debts from your customer, just get in touch with the team today.