Published in Debt Advice Features on Friday, February 02 2007

Bankruptcy can seem over complicated and very formal, one of the reasons for this can be put down to the terms used within bankruptcy, the terms and confuse matters more, this article will outline and explain the majority of terms used within the bankruptcy process. You should find a link under the explanation which will direct you to other articles within this site relating to the relevant term. 

Annulment

Annulment is a term used to cancel a bankruptcy order made by the court.

More on Annulments

Assets

The term assets is used when describing belongings that you own, which are normally of significant value that could be sold in bankruptcy to pay towards your debts.

Asset Your Home

Bankruptcy Order

A bankruptcy order is made by the courts, the order can be requested by a person who has petitioned for the own bankruptcy or a creditor has made the individual bankrupt.

Bankruptcy Restrictions Order or undertaking

A Bankruptcy Restrictions Order is made against an undischarged bankrupt by the courts, this requested by the Trustee when they think or believe the person has been fraudulent, has not co-operating with the trustee, or the bankruptcy could be classed as criminal, these restrictions would mean the person would have the bankruptcy restrictions imposed on them for 2 to 15 years.

More On Bankruptcy Restrictions Orders

Bankruptcy Petition

A Bankruptcy Petition is lodged at court by an individual wishing to be made bankrupt or a creditor who is seeking to make the person bankrupt.

Charging Order

A charging order is an order made by the court, giving the bankruptcy Trustee a legal charge against your property, allowing them to sell or release the interest/equity in the property to pay towards your debts.

Creditor

A creditor is someone who is owed money in bankruptcy.

Debt

Money that is owed in bankruptcy and is classed as unsecured debt, not taken out secured against any property or goods you bought.

Discharged

Discharged is the term used in bankruptcy when an individual is free from the bankruptcy restrictions imposed on the when they were made bankrupt.

Discharge Certificate

Once the person has been discharged from bankruptcy they may obtain a certificate from the court that made the bankruptcy order, this will give them written proof they are free from bankruptcy.

Disposable Income

Disposable income is the surplus money after day-to-day living expenses, prior to making any repayments to your debts. If you petition for bankruptcy and have some disposable income, it is likely you would have to enter into an IPA or IPO.

Estate

Your Estate is seen as everything you own in total, these are also classed as your assets and are generally worth money that could be released by way of sale to pay to your creditors.

Fast Track Voluntary Arrangement

An Individual Voluntary Arrangement after a person has been made bankrupt; you would need to speak to your bankruptcy Trustee to see if this was possible.

IPA (Income Payments Agreement)

An IPA is an agreement between yourself as a bankrupt and your bankruptcy Trustee; you would make a payment each month to the Trustee for maximum of 3 years.

IPO (Income Payments Order)

If an IPA has not been successful then the Trustee may apply to the court to ask them to make the order against you, which would order you to make a payment each month for a maximum of 3 years.

IVA (Individual Voluntary Arrangement)

An IVA is an alternative to bankruptcy; it is a formal arrangement whereby you would agree to pay back as much as you can over 5 years, after the term your creditors would agree to write off any remaining debt.

More on Individual Voluntary Arrangements

Insolvency

Insolvency is defined as having insufficient assets to meet all debts, or being unable to pay debts when they are due.

IP (Insolvency Practitioner)

An IP is an accountant who hold with special license and specialise in insolvency work, they are authorised by either the Secretary of State or by another recognised professional body, the IP will generally act a bankruptcy trustee or where an IVA may be a better option they would become the supervisor of the IVA.

Interest

The term interest in Bankruptcy differs from interest on credit cards and loans etc. The word interest in bankruptcy means a persons share or right to, in a property or assets that they may own jointly or solely.

Legal Charge

A Legal Charge is a way of securing interest in a persons property or any assets of value; this would allow the Trustee to raise funds to pay the debts in bankruptcy.

Official Receiver

The Official Receiver will be appointed to your bankruptcy case after the bankruptcy order has been made against you, they will become your Trustee, see “Trustee”

Preferential Creditor

A preferential creditor is a creditor who generally cannot be included in bankruptcy, and money owed to them would not be seen as a bankruptcy debt, these creditors are: Mortgages and Secured loans, Council Tax, Current Utility Bills, Vehicle HP/Finance, occupational Pensions schemes and employees (if applicable)

Proxy

The term Proxy is used, when a meting in person cannot be done, it may be possible to appoint a representative to go and speak/vote on their behalf.

Public Examination

If the court feels that the individual’s financial circumstances or pending bankruptcy needs to be examined, then they will order the hearing to be done in open court, to explain and allow their affairs to be examined, this includes dealing with property.

Statement Of Affairs

The Statement of Affairs is a mandatory document that is needed when a person declares bankruptcy, the document will outline clearly the individuals personal and financial circumstances, including any assets they may have, and this document supports the Bankruptcy Petition.

Statutory Demand Notice

A Statutory Demand Notice is used by creditor when they wish to make an individual bankruptcy; a stat demand has to be issued in person and gives the debtor 21 days to pay the creditor in satisfaction of the debt. If this is not paid then the creditor now has proof for the court to make the bankruptcy order after the creditor has filed the relevant forms to the court.

More on Statutory Demands.

Suspension

If the Trustee feels that the undischarged bankrupt has not co-operated with them or took to long to co-operate, then the Official Receiver will apply to the court to get a suspension of discharge. This will mean the person will not be discharged until they start to co-operate with the Trustee.

Trustee

The Trustee in bankruptcy is a person who will administer and investigate an individuals bankruptcy, this can either be the Official Receiver who will be an employee of The Insolvency Service, or an Insolvency Practitioner will be appointed to act as Trustee. The Trustees main duties are to try and raise as much money out of a bankruptҒs estate to share between the persons creditors.

Unsecured Creditor

Unsecured creditors are the main debts that are included in bankruptcy; it is defined by the creditor not holding security for the money outstanding against any property or vehicle. Please note that some unsecured creditors can be classed as a preferential creditor.