Demystifying Debt Terms: Financial Glossary

CIFAS is a fraud prevention service in the UK. A “CIFAS marker” on your credit file means an organisation believes you have been involved in fraud or are a victim of fraud.

The most common type is a “Protective Registration” (where you ask for it to prevent ID theft), but a “Misuse of Facility” marker (e.g., using a bank account for money laundering) can virtually ban you from obtaining any financial products for six years.

Breathing Space is a government scheme that gives you legal protection from your creditors for up to 60 days.

During this time, most interest and penalty charges are frozen, and enforcement action must stop. It is designed to give you time to get debt advice and set up a solution without the pressure of chasing letters or calls. There is also a specific “Mental Health Crisis Breathing Space” which lasts for the duration of your treatment plus 30 days.

An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your creditors to pay back your debts over a period of time (usually 5 or 6 years).

It must be set up by a qualified professional called an Insolvency Practitioner. In an IVA, you make affordable monthly payments, and at the end of the term, any remaining unsecured debt is written off. It stops creditors from taking further legal action against you, but it will negatively affect your credit rating for six years.

A Debt Relief Order (DRO) is a way of dealing with debts if you have a relatively low amount of debt, little spare income, and few assets. It acts as a cheaper alternative to bankruptcy.

If your DRO is approved, your debt repayments stop for 12 months. If your financial situation hasn’t improved at the end of that year, the debts included in the order are written off (“discharged”). To qualify, you must owe less than £50,000, have less than £75 per month disposable income, and have assets worth less than £2,000 (with a car worth no more than £4,000).

A Debt Management Plan (DMP) is an informal agreement between you and your creditors to pay back your non-priority debts. You pay one monthly payment to a DMP provider, who then divides it among your creditors.

Unlike an IVA or Bankruptcy, a DMP is not legally binding, meaning creditors can technically still contact you or take legal action, though most will agree to the plan if your offer is fair. You should ideally set up a DMP through a free provider (like StepChange or PayPlan) rather than a fee-charging company.

A creditor is simply a person, company, or organisation to whom you owe money. This could be a bank, a credit card company, a local council (for tax), a landlord, or a utility supplier.

“Arrears” refers to the amount of money you have missed on regular payments. If you miss your rent or council tax payment, you are said to be “in arrears”.

It is distinct from the total balance. For example, you might owe £100,000 on your mortgage total, but if you missed last month’s payment of £500, your arrears are £500. Dealing with arrears is usually the first priority in debt advice.

Insolvency is a legal state describing a situation where you cannot pay your debts when they are due, or where your total liabilities (debts) exceed your total assets.

Formal insolvency solutions in the UK include Bankruptcy, Individual Voluntary Arrangements (IVAs), and Debt Relief Orders (DROs).

A County Court Judgment (CCJ) is a court order in England, Wales, and Northern Ireland that might be registered against you if you fail to repay money you owe.

If you receive a CCJ, it means the court has formally decided that you owe the money. The judgment will detail how much you owe, how to pay (in full or instalments), and the deadline. A CCJ stays on your credit file for six years, making it difficult to get credit in the future. If you pay the full amount within one month, you can get the judgment removed from the register.

A Default Notice is a formal letter from a creditor warning you that your account is about to default because you are behind on payments.

It is a requirement under the Consumer Credit Act. The notice will give you at least 14 days to pay the arrears to bring your account back up to date. If you do not pay within this time, the account defaults, usually resulting in the debt being sold to a collection agency and a default being registered on your credit file for six years.

Commonly known as “bailiffs,” the official legal term is now Enforcement Agent. These are individuals legally authorised to collect debts on behalf of creditors.

They have the legal power to visit your home to remove and sell goods to pay off debts such as Council Tax arrears, parking fines, or County Court Judgments (CCJs). However, they usually cannot force entry into your home for most types of debt unless you have let them in previously or they have specific court authority (such as for criminal fines or tax debts). You should typically seek advice immediately if an enforcement agent contacts you.

A Charging Order is a legal order that secures a debt against your home or other property. It usually follows a County Court Judgment (CCJ) that you haven’t paid.

It turns an “unsecured” debt into a “secured” debt. This means if you sell your house or remortgage, the debt must be paid from the proceeds. In rare cases, a creditor can apply for an “Order for Sale” to force you to sell your home to pay the debt.

“Statute barred” refers to a debt that is too old to be enforced through the courts. In England, Wales, and Northern Ireland, most debts become statute barred if:

1. 1 - The creditor has not already taken you to court (obtained a CCJ).
2. 2 - You have not made a payment towards the debt in the last six years.
3. 3 - You have not written to the creditor acknowledging the debt in the last six years.

If a debt is statute barred, the debt technically still exists, but the creditor cannot take legal action to recover it.

The Financial Conduct Authority (FCA) is the regulator for financial services in the UK. They set the rules that banks, lenders, and debt collection agencies must follow.

If a firm treats you unfairly or breaks FCA rules (such as harassing you or ignoring a vulnerability), you can complain to the firm and then to the Financial Ombudsman Service.

Priority debts are debts that carry the most serious consequences if you don’t pay them. They should always be paid before “non-priority” debts like credit cards.

Examples of priority debts include:

• Mortgage or Rent arrears (risk of losing your home).
• Council Tax arrears (risk of bailiff action or imprisonment).
• Gas/Electricity arrears (risk of disconnection).
• Court fines (risk of enforcement action or imprisonment).
• Child Maintenance.

Non-priority debts are those where the creditor has less immediate power to take your home or essential services. While you are still liable for the money and can be taken to court (resulting in a CCJ), the immediate consequences are less severe than priority debts.

Examples include:

• Credit card debts.
• Unsecured personal loans.
• Water bill arrears.
• Overdrafts.
• Catalogue debts.