Glossary

Agreement:

Means the agreement between the client and the debt management provider made principally on the debt management company’s Terms of  Business.

Annual Review:

A full re-assessment of the client’s current financial circumstances on the anniversary of them commencing on the DMP or the anniversary of their last full review.

Bankruptcy

Bankruptcy, in law, is defined as the settlement of the liabilities of a person who is unable to meet their financial obligations. Bankruptcy is a formal method of dealing with debts if other options have failed or are inappropriate. The consequences of bankruptcy are severe and no one should make an application for bankruptcy without seeking advice. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most instances, to discharge the debtor from further liability. Bankruptcy proceedings may be voluntary (instituted by the debtor) or involuntary (instituted by creditors).

Cleared Funds:

Means any payments by the client received into the debt management company’s Fee or  Client Account that can be drawn upon, irrespective of the method of payment, for example; direct debits, standing orders, cash payments by payment card, debit card, bank giro credits or electronic transfers.

Client Account:

The account where any monies held on the client’s behalf, in respect of their monthly Debt Management Plan (DMP) payments, are kept and which cannot be used for any other purpose in the debt management company’s business

Client Authority Form:

These forms are required to be signed by the client to give the debt management company authority to contact the client’s Creditors and to act on the client’s behalf. In many instances the Creditors do not need to see these forms, as debt management companies routinely deal with them under a formal Data Protection Agreement, however, they require to be on record in the event of a request for inspection by any Creditor with whom the debt management company is dealing on a client’s behalf.

Client Financial Planner:

A detailed statement of the client’s current financial affairs, listing sources of income and items of expenditure, including Priority Creditors and other unsecured Creditors. This is used as the basis of calculating what the client can reasonably afford to pay to their Creditors every month and is used as the basis of the debt management company’s Instruction Fee, where this fee is not waived.

Creditor:

The organisations that a client owes money to that are not Priority Creditors. This means all of the people or businesses the client has told the debt management company that they owe money to and who are included in the Client Financial Planner. 

Debt Management Agreement or DMA:

The contract terms that govern the Debt Management Services provided to the client by the debt management company.  This must comply with the Office of Fair Trading – Debt Management Guidance – issued in 2001. This agreement must be fair and in plain, legible English.

Debt Management Company (DMC):

A company properly licensed under the Consumer Credit Act 1974 that acts as a client’s Debt Manager. A DMC will provide advice on how to restructure debts, alter debt repayments and/or achieve early resettlement of debts. This will normally involve negotiating with Creditors and providing the client with a facility to make a single monthly which is distributed to their creditors. This requires regular reviews of the client’s financial circumstances and/or on-going monthly payments.   

Debt Management Plan or (DMP):

The DMP, or Single Payment Plan, represents the informal arrangement between the client and their creditors whereby the debt management company administers the reduced monthly payments to the client’s Creditors on their behalf. The client makes one monthly payment and the debt management company deducts its Monthly Management Fee and then distributes the agreed amounts to the client’s Creditors on a proportional basis, based upon the amount of debt owed to each Creditor. Each Creditor will receive at least a minimum payment of between £2.00 and £5.00. The client will receive a monthly statement.

IVA (Individual Voluntary Arrangement):

 An IVA is a formal agreement made between a debtor and his creditors about how the debts will be paid (either in full or in part). To enter into an IVA you need to apply to a court and an insolvency practitioner has to be appointed to supervise the arrangement. An IVA is an alternative to bankruptcy

Instruction Fee or Initial Fee:

An initial Fee that is payable by the client for setting up the Debt Management Plan and negotiating with their Creditors to accept reduced monthly payments and attempt to get interest & charges on debts frozen either immediately or in the near future. The Instruction Fee is calculated using a tariff that takes account of the total value of the client’s debt and the number of creditors. In some instances, based upon a client’s personal  circumstances, the debt management company will waive the Instruction Fee because it feels that the Debt Management Plan is in the client’s best interests.     

Monthly Management Fee:

A monthly fee for; managing the client’s affairs with their listed creditors, providing on-going debt advice, administering payments, issuing statements & correspondence reports, processing correspondence receive from creditors, dealing with new creditors or agencies when notified and generally acting in the client’s best interests over the duration of the Debt Management Agreement.

Priority Creditors:

These are regular payments and payment arrears for mortgage, rent, council tax and utility bills.  Individuals should not ignore any payment arrangements enforced through a court.     

Qualifying Debt:

The total unsecured debt and the number of creditors listed in a Client Financial Planner.

Scottish Trust Dead:

A Trust Deed (more properly a Protected Trust Deed) is the Scottish equivalent of an IVA. It is a formal arrangement that is used in Scotland where a consumer grants a 'deed' in favour of the trustee which transfers their assets to the trustee for the benefit of creditors. It will normally stop legal action and protect you and your home. Provided certain conditions are met, the Trust Deed may be registered as "protected", thereby preventing creditors from petitioning for the debtor's sequestration.

Single Payment Plan (SPP):

EuroDebt’s branded Debt Management Plan (DMP).

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