IVA.TV Definitions

IVA.TV - To speak to an IVA Advisor please call UK 0800 048 3651

IVA – Debt Glossary and Definitions

IVA Glossary – Definitions of Insolvency, IVA, Bankruptcy and Debt Terms

Administration order
An administration order is made in a county court to arrange and administer the payment of debts by an individual or an order made by a court in respect of a company that appoints an administrator to take control of the company. A company can also be put into administration if a floating charge holder, or the directors or the company itself file the requisite notice at court.

Administrative receiver
An Insolvency Practitioner appointed by the holder of a debenture that is secured by a floating charge that covers the whole or substantially the whole of the company’s assets. The Insolvency Practitioner’s task is to realise those assets on behalf of the debenture holder.

Administrative receivership
The process where an insolvency practitioner is appointed by a debenture holder (lender) to realise a company’s assets and pay preferential creditors and the debenture holder’s debt. The right of a debenture holder to appoint an administrative receiver has been restricted by the Enterprise Act 2002.

Common Misspelling: administrative recievership

Administrator
An Insolvency Practitioner appointed by the court under an administration order or by a floating charge holder or by the company or its directors filing the requisite notice at court.

Assets
Anything that belongs to the debtor that may be used to pay his/her debts.

Bankruptcy (Bankrupt)
Bankruptcy is where an individual is declared insolvent because they have insufficient assets and income to adequately repay their debts. Voluntary Bankruptcy is where an individual petitions for their own bankruptcy, Involuntary Bankruptcy is where bankruptcy is petitioned by a creditor (the creditor must be owed a minimum of £750).

Common Misspellings: Bankrupcy, Bancrupcy, Bancruptcy

Bankruptcy restrictions order or undertaking
A procedure will be introduced on 1 April 2004 whereby a bankrupt who has been dishonest or in some other way to blame for their bankruptcy may have a court order made against them or give an undertaking to the Secretary of State which will mean that bankruptcy restrictions continue to apply after discharge for a period of between two to fifteen years.

Charge
Security interest taken over property by a creditor to protect against non-payment of a debt (such as a mortgage).

Company Directors Disqualification Act 1986
An Act of Parliament about the disqualification of directors.

Consumer IVA or Consumer Simple IVA (Consumer SIVA)
See SIVA.

Compulsory liquidation
Winding up of a company after a petition to the court, usually by a creditor.

Contributory
Every person liable to contribute to the assets of a company if it is wound up. In most cases this means shareholders who have not paid for their shares in full.

Creditor
Someone owed money by the individual or Company facing bankruptcy or insolvency.

Debenture
A document in writing, usually under seal, issued as evidence of a debt or the granting of security for a loan of a fixed sum at interest (or both). The term is often used in relation to loans (usually from banks) secured by charges, including floating charges, over companies’ assets.

Debt Arrangement Scheme (DAS)
A Debt Arrangement Scheme is a type of formal debt management plan in Scotland only. It is arranged by an approved Money Advisor and as long as you keep to agreed payments creditors cannot take enforcement action against you. A Debt Arrangement Scheme is administered by the Accountant in Bankruptcy (AIB) but is NOT bankruptcy.

Misspelling: Debt Arrangment Scheme

Debt Consolidation
Debt Consolidation is where a number of debts are restructured into one single affordable monthly payment ideally at a lower monthly payment than the sum of the previous payments. Debt Consolidation can achieved through either a loan, remortgage, debt management plan, bankruptcy or an IVA.

Common Misspellings: Debt Consilidation, Debt Consolodation, Debt Consoladation, debt consiladation

Debt Management
A Debt Management Plan (DMP) is a repayment scheme which helps make unsecured debt repayments more affordable. Normally a 3rd party (Debt Management Company) negotiates with your unsecured creditors to reduce your monthly payments to an affordable level.

Common Misspelling: Debt Managment

Debtor
The person or company who owes money i.e. the bankrupt or insolvent company.

Director
A person who conducts the affairs of a company.

Disqualification
A procedure whereby a person has a court order made against them or gives an undertaking to the Secretary of State which makes it an offence for that person to be involved in the management or directorship of a company for the period specified in the order (unless leave has been granted by the court).

Dividend
Any sum distributed to unsecured creditors in an iva, insolvency or bankruptcy.

Fixed charge
A charge held over specific assets. The debtor cannot sell the assets without the consent of the secured creditor or repaying the amount secured by the charge.

Floating charge
A charge held over general assets of a company. The assets may change (such as stock) and the company can use the assets without the consent of the secured creditor until the charge “crystallises” (becomes fixed). Crystallisation occurs on the appointment of an administrative receiver, on the presentation of a winding-up petition or as otherwise provided for in the document creating the charge.

Guarantee
An agreement to pay a debt owed by a third party. It must be evidenced in writing for it to be enforceable.

Individual Voluntary Arrangement (IVA) / Individual Voluntary Arrangements (IVAs or IVA's)
An IVA (Individual Voluntary Arrangement) is a Government Backed Scheme that enables individuals who are unable to meet their unsecured debt repayments in full to pay back a reduced amount normally over a 5 year period. UK residents excluding Scotland – See Protected Trust Deeds for the Scottish equivalent.

Sometimes miscalled an Individual Voluntary Agreement.

Insolvency Practitioner
An authorised person who specialises in insolvency, usually an accountant or solicitor. They are authorised either by the Secretary of State or by one of a number of recognised professional bodies i.e. Institute of Chartered Accountants in England and Wales.

Common Misspelling: Insolvent Practitioner

Insolvency Register or Insolvency List
Also known as Bankruptcy Register, Bankruptcy List or IVA Register or IVA List. A Bankruptcy or IVA is recorded in a Bankruptcy register (The Individual Insolvency Register is a Public Record of Bankruptcies and Individual Voluntary Arrangements). Bankruptcies and IVA's are also listed in the London or Belfast Gazette.

IVA
Abbreviation for Individual Voluntary Arrangement.

Liquidation (winding up)
Applies to companies or partnerships. It involves the realisation and distribution of the assets and usually the closing down of the business. There are three types of liquidation – compulsory, creditors’ voluntary and members’ voluntary.

Liquidator
The Official Receiver or an insolvency practitioner appointed to administer the liquidation of a company or partnership.

Mortgage
A loan that is secured against your property. Normally used to enable a person to buy a residential property.

Common Misspelling: Morgage

Nominee
An IP who carries out the preparatory work for a voluntary arrangement, before its implementation.

Officer (of a company)
A director, manager or secretary of a company.

Official Receiver
An officer of the court and civil servant employed by The Insolvency Service, who deals with bankruptcies and compulsory company liquidations.

Petition
A formal application made to a court.

Preferential creditor
A creditor who is entitled to receive certain payments in priority to floating charge holders and other unsecured creditors. These creditors include occupational pension schemes and employees.

Proof of debt
A statutory form completed by a creditor in a compulsory liquidation to state how much is claimed. The form is supplied by the Liquidator.

Protected Trust Deed (PTD)
The Scottish equivalent of an IVA but is normally over a 3 year period rather than 5 (IVA). A Trust Deed is a Government backed formal legally binding agreement between an individual who is unable to pay their creditors and a licensed Insolvency Practitioner (the Trustee). The Trustee will put together a form of proposals to the Creditors for approval and administer the Trust Deed. They also take responsibility for liaising with your creditors and distributing funds on your behalf. A Trust Deed is a form of informal bankruptcy and is regulated by The Bankruptcy (Scotland) Act 1985. The individual must be resident in Scotland.

Provisional liquidator
OR/IP appointed to preserve a company’s assets pending the hearing of a winding up petition.

Proxy
Instead of attending a meeting, a person can appoint someone to go and vote in their place – a ‘proxy’.

Proxy form
Form that must be completed if a creditor wishes someone else to represent him or her at a creditors’ meeting and vote on his or her behalf.

Public examination
When a company is being wound up or in bankruptcy proceedings, the Official Receiver may at any time apply to the court to question the company’s director(s) or any other person who has taken part in the promotion, formation or management of the company or the bankrupt.

Realise
Realising an asset means selling it or disposing of it to raise money, for example to sell an insolvent’s assets and obtain the proceeds.

Receiver
The commonly used name for an administrative receiver. The term can also mean a person appointed by the court or with the power to receive the rents and profits of property. Receivers who are not administrative receivers do not need to be insolvency practitioners.

Receivership
A company in administrative receivership is often said to be “in receivership”.

Remortgage
A remortgage is where an existing mortgage is replaced with a new mortgage which can enable part or all of the equity in the property to be released (equity is the difference between the value of the property and the original mortgage) i.e. the new mortgage will pay-off the existing mortgage and can provide additional funds quite often used for debt consolidation or home improvements. A remortgage can also be used to move to a lender that charges a lower interest rate than the original lender.

Common Misspelling: Re-Mortgage, remorgage

Rescission
A procedure that cancels a winding-up order.

Release
The process by which the Official Receiver or an insolvency practitioner is discharged from the liabilities of office as trustee/liquidator or administrator.

Secretary of State
The Secretary of State for the Department of Trade and Industry

Secured creditor
A creditor who holds security, such as a mortgage, over a person’s assets for money owed.

Sequestration
The Scottish equivalent of Bankruptcy. A sequestration is advertised in local papers and The Edinburgh Gazette.

Misspellings: Seguestration, sequestartion, sequastartion.

Simple IVA (SIVA)
A SIVA or Simple IVA or Consumer IVA is a proposed new version of an IVA that should give greater access to IVA's for people with lower debts and/or lower disposable income. Because the process would be simplified smaller fees are expected to be charged by the Insolvency Practitioner and hence would be more acceptable to creditors resulting in cases that currently are rejected for an IVA would have a better chance of being acceptable. A SIVA prepared meeting the required guidelines may have guaranteed acceptance.

Also: Consumer IVA, Consumer Simple IVA, Consumer SIVA

Statement of affairs (SOA)
A document sworn under oath, completed by a bankrupt, company officer or director(s), stating the assets and giving details of debts and creditors.

Supervisor
An Insolvency Practitioner appointed to supervise the carrying out of a company voluntary arrangement.

Unsecured creditor
A creditor who does not hold security (such as a mortgage) for money owed. Some unsecured creditors may also be preferential creditors.

Voluntary liquidation
A method of liquidation not involving the courts or the Official Receiver. There are 2 types of voluntary liquidation – members’ voluntary liquidation for solvent companies and creditors’ voluntary liquidation for insolvent companies.

Winding-up order
Order of a court, usually based on a creditor’s petition, for the compulsory winding up or liquidation of a company or partnership.