This comprehensive glossary, drawing insights from Debt-Claims and Advocate’s Debt Recovery Glossary, demystifies key terms and concepts.
Key Terms in Debt Recovery
- Acid Test Ratio: A financial metric used to evaluate a company’s ability to meet its short-term obligations. In debt recovery, this ratio can help in formulating repayment plans.
- Agent: A person authorised to act on behalf of another, legally binding the principal by their actions. This is important in debt collection where agents may be used to recover debts.
- Annual Return: A summary of a company’s financial activity over a year, submitted to Companies House. This document is crucial for collectors in assessing a company’s financial health.
- Bankruptcy: Where a person cannot pay debts owed and is declared bankrupt by the Court. This process can be voluntary or done at the request of a creditor and the debtors assets will be sold by the Reciever to repay creditors.
- Bill of Exchange: A written order used mainly in international trade that binds one party to pay a fixed sum of money to another party on demand or at a predetermined date. .
- County Court Judgment (CCJ): A judgment from a County Court that confirms a debt is owed. It is a critical step in formal debt recovery.
- Charging Order: A court order that attaches a debt to an asset owned by the debtor, for example, a property or funds, potentially leading to the sale of the asset if the debt is not paid.
- Consumer Credit Act (CCA): Legislation governing the agreements for personal loans, credit cards, and other forms of personal credit.
- Debenture: A document that records a debt and the repayment process agreed upon by the debtor and creditor..
- Enforcement: Actions taken following a successful debt recovery claim if the judgment is not satisfied. This includes methods like bailiff intervention and attachment of earnings.
- Insolvency: Where a business is unable to pay debts owed, often leading to formal insolvency proceedings like liquidation or administration.
- Liquidation: The process of winding up a company’s affairs and distributing its assets to creditors..
- Official Receiver: An Insolvency Service officer appointed by the Court is accountable to the Secretary of State for Business, Innovation, and Skills as well as the Court to administer compulsory (via a winding up petition) company liquidations .
- Retention of Title Clause: A clause in a contract that prevents ownership of goods from transferring to the buyer until the goods have been paid for in full.
- Secured Creditor: A creditor who holds a security interest in an asset of the debtor (for example a mortgage lender holds a security over the mortgaged property), which provides additional security in case of the debtor’s default.
- Statutory Interest: Interest that can be charged on late commercial payments, calculated according to a statutory formula.
- Winding up Order: A court order that forces a company to stop trading and liquidate its assets.
This glossary is an essential tool for anyone involved in the debt recovery process in the UK. Understanding these terms facilitates better communication and decision-making in what can often be a complex and challenging field.
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