Debt Management Glossary
Clear, plain-English definitions for terms related to debt solutions and insolvency.
Jump to letter:
Administration Order
A County Court order for people with less than £5,000 of debt and at least one CCJ. You make one monthly payment to the court, which divides the money among your creditors.
Bankruptcy
A formal, legal insolvency process for people who cannot pay their debts. It writes off most unsecured debts but involves handing over valuable assets (potentially including your home) and stays on your credit file for six years.
Breathing Space
A government scheme (the Debt Respite Scheme) that gives people in problem debt legal protections from creditor action for up to 60 days, pausing most enforcement action and freezing interest and charges.
County Court Judgment (CCJ)
A court order telling you to repay a debt. If you do not pay the full amount within 30 days, the CCJ is recorded on your credit file for six years, severely damaging your credit score.
Debt Management Plan (DMP)
An informal agreement between you and your creditors to pay all your debts. You make reduced monthly payments based on what you can afford. It is not legally binding, so creditors can still contact you or add interest.
Debt Relief Order (DRO)
A formal insolvency process for people with low incomes, few assets, and debts under £50,000 (as of 2024). It pauses debt repayments for 12 months, after which the debts are written off if your situation has not improved.
Default Notice
A formal letter from a creditor warning that your account is about to default because you have missed payments. You usually have 14 days to pay the arrears before the default is registered on your credit file.
Individual Voluntary Arrangement (IVA)
A legally binding agreement to pay back a portion of your debts over a set period (usually 5 years). At the end of the IVA, the remaining unsecured debt is written off. It is managed by an Insolvency Practitioner.
Insolvency Practitioner (IP)
A licensed professional, usually an accountant or solicitor, who is authorised to manage formal insolvency procedures like IVAs and bankruptcies.
Priority Debts
Debts that carry the most severe consequences if left unpaid, such as losing your home, having your energy cut off, or going to prison. Examples include mortgage arrears, rent, council tax, and utility bills.
Check Your Credit Score Free
CHECK YOUR CREDIT SCORE NOW