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Definitions of Debt terms

The following terms represent some of the terms in use today by companies working within the debt industry.


Debt is a term used to represent an outstanding account, a bill, a loan, or other funds borrowed by a person or organisation, that have not been paid or repaid at the presant time.


The person who owes the debt (may be a company or business)


The person / company that a debt is owed to.


The backlog of debt payments that have not been made and are building up over time.


In terms of debt, finance is money borrowed for the purposes of purchasing goods or services, or in some cases to pay other debts.

Collateral (or security)

Collateral is any goods, or possessions (assets) which have been used as security for a loan.
In the event of non-payment of a loan, the 'Collateral' may be repossed and sold to recover funds for the lender.

The most common example of this is a Mortgage, where a house is used as security.

Scheme Of Arrangement

A Scheme of Arrangement is a formal arrangement to settle, or pay off debt which is processed through the high court, other names include, creditors compromise, Part 5 proposal.
In the UK They are commonly referred to as Individual Voluntary arrangement (or IVA)

Creditors Pool

A 'creditors pool' is a (now defunct) term that refers to a croup of creditors (debts) which are managed by someone other than the debtor.
This term has very little use, and is now been replaced with the internationally recognised 'Debt Management Plan' Terminology.

Debt Settlement

The process of offering a reduced value (or discounted) value to the creditor for a debt, to settle the debt in full.
The remainder of the balance (if the offer is acceptable) is then written off by the creditor and anot required to be repaid.


Reposession of goods is the act of seisure of the goods upon non-payment of the loan.
The reposessed goods are then held (according to the terms of the Credit Reposession Act), for the prescribed period of time, before being sold.

The Sale of reposessed goods, will generate funds to be applied to the outstanding loan, but also may generate costs for the seller, which may in some instances be applied to the balance of the loan.


When a person has not got sufficient funds to pay a creditor, as well as provide for the basics of the need to live, such as food, shelter, clothes etc, the person is technically insolvent.

A more detailed description of insolvency can be found here:(INSOLVENCY)


A person who is declared bankrupt by their own admission (a debtors Petition) or by the ruling of the high court (on application by a creditor), has their affairs managed by a Supervisor of the Insolvency and Trustee Service.
The supervisor / trustee determines the rate of which the debt is to be repaid and/or whether the client may be discharged from bankruptcy.

for more information see the Insolvency and Trustee Service website


Assignment is the transfer of the ownership of your account between creditors, such as a failing finance company and a receivables company. Once assigned the original creditor has no legal right to the debt.
(opposite of outsourced - see below)

Outsourced (collection)

When a creditor involves a third party in their debt recovery process, the third party does not have a legal title to the debt.
The debt is still owned by the original creditor.

Note, in the absence of a copy of the contract between the creditor and the collector, the collector is actin with 'apparent authority' therefore any representations and conduct of the Collector may be considered to be as if the actions were said or done by the creditor themselves.