Glossary

A glossary of debt recovery terms.

Debtor

The person or company that owes the money.

Creditor

The person or company that are owed the money.

Credit Report

A report prepared by a credit reference agency which details the credit history of a business or individual to allow an assessment of their creditworthiness.

Debtor Ledger

A record of all amounts owed to a business by an individual debtor, often broken down into categories such as; less than 30 days, over 30 days, over 60 days and over 90 days.

Anything over 90 days will often be referred to as “aged” depending upon industry norms.

Bad debt/ Bad debt provision

A debt that is considered unlikely to be collected and should therefore be provided for/written off.

In providing for the debt, the creditor may make an estimation that whilst they don’t expect to get all the money owed, they may get 25% of the debt, for example. In making this assessment, they are making a provision.

Debtor days

A measure of how long it is taking to get paid. 

Often used as a KPI or a common accounting ratio by banks and financial institutions.

Default

When a financial obligation is not fulfilled.

For example, if an agreed monthly repayment is missed, this is often referred to as a default or default event.

Arrears

Missed payments and failure to pay when required will cause an account to fall into arrears.

Statutory Demand

A notice served on the debtor as a formal demand to make payment or face legal proceedings, in respect of a debt exceeding £750.

Late Payment Fees

Fees that can be validly charged on a business to business debt in accordance with the Late Payment of Commercial Debts (Interest) Act 1998.

LBA - Letter before Action / Letter of Claim

A letter that is required to be sent to the debtor before instigating legal action.

The letter must detail the debt due and include a breakdown of all the costs that have been added such as interest, late payment fees and reasonable debt recovery costs.

Debt Recovery Costs

Compensation for the reasonable costs the creditor has incurred in pursuing the debtor for monies owed. 

These costs are closely monitored and subject to the restrictions as defined in the Late Payment of Commercial Debts (Interest) Act 1998.

Pre-Action Protocol

The procedures that governs the conduct of debt collection practices, when the creditor is a business and the debtor is an individual.

The protocol describes the conduct expected of the debtor and the creditor.

ADR

Alternative Debt Resolution is the umbrella term given to the range of out of court options that could be used to try and resolve a debt collection issue. This could be mediation.

Mediation

A process overseen by a qualified mediator who seeks to resolve the case by working with both the debtor and the creditor to reach a mutually agreed resolution.

Without Prejudice

A term used when one party to a dispute wishes to make a settlement offer to the other party, but wants to make it clear that the offer being made is without admission of any liability and with all rights of the party making the offer being reserved. 

Items marked ‘without prejudice’ cannot be used as evidence in Court.

CCJ – County Court Judgment

A County Court awarded judgment requiring the debtor to pay.

These can be obtained very quickly and by default if the debtor fails to respond to the first notification for payment.

The cost of filing varies on the size of the debt and there are certain restrictions.

Acknowledgement of Service

An indication that the debtor (known from here on in as the defendant), will be looking to defend the claim or admit it in part (also known as a part-admission).

Counterclaim

Notification that the defendant wishes to make a claim against the creditor (known from here on in as the applicant). This could be of equal value to the existing claim, less than or even more than.

Set-aside

In some cases, with good reason such as a failure on the part of the creditor to follow the right process, the debtor may be able to get a judgment “set aside”.

This doesn’t mean the debt is cancelled, only that the judgment is. 

Essentially, the debtor and creditor are back in the same position they were immediately before the judgment.

Notice of Discontinuance

What is filed by the applicant to notify the Court, if they don’t want to continue with the claim during any stage of the process.

Order

Once a judgement has been entered, the Order will be issued and will say; the amount to be paid, when to pay and where to pay.

Bailiff

Court appointed collection agents who will visit the debtor to collect the money or see if the debtor has assets that can be removed and sold to recover the money owed.

HCE – High Court Enforcement

A privately employed collection agent who is duly authorised to attend the debtor’s premises to collect money or assets to pay the debt owed.

HCE can be used as long as the creditor has a CCJ that has not been paid, the debt is over £600 and the debt is not regulated by the Consumer Credit Act.

Writ of Control

Often simply referred to as a Writ, it is the method used to enforce non-payment of a debt after obtaining a county court judgement.

Charging Order

Order made by the Court which places a charge over a specific asset.

For example, a charge may be registered against a property. When the property is sold, the creditor with a Charging Order has priority in terms of being paid.

Winding Up Petition

An application to the Court to have a Company wound up and a Liquidator appointed to realise the assets and investigate the affairs of the Company and its directors.

Bankruptcy Petition

An application to the Court to have a person declared bankrupt. 

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