Glossary of debt terms

This glossary contains some of the main terms used in connection with problem debt and personal insolvency. The Competition and Consumer Protection Commission (CCPC) also explains terms related to debt in the CCPC jargon buster.

Abhaile Scheme

Abhaile is a free scheme that helps homeowners who are in mortgage arrears and at risk of losing their homes. The Money Advice and Budgeting Service (MABS) provides access to this service.

Approved Intermediary

An approved intermediary is a person authorised to help a debtor to make an application for a Debt Relief Notice (DRN).

Arrears

Arrears is a debt or payment that is not paid by the due date. It is another term for missed payments.

Bankruptcy

Bankruptcy is a settlement of the debts of someone who is unable to repay their debts. It deals with both secured and unsecured debt.

The purpose of the bankruptcy is to distribute your assets fairly among your creditors and protect you from these creditors. The distribution is done through a court official, the Official Assignee in Bankruptcy.

Code of Conduct on Mortgage Arrears (CCMA)

The CCMA is a statutory code, issued by the Central Bank of Ireland, which requires mortgage lenders to follow specific procedures when dealing with borrowers who are facing mortgage arrears. Under this Code, each lender must have a Mortgage Arrears Resolution Process (MARP). Read more about Consumer protection codes and mortgages.

Consolidation Loan

A consolidation loan is a new, single loan that combines (consolidates) more than one outstanding debt. For example, a consolidation loan could combine your credit card debt, mortgage or rent arrears, loan repayments and household bills into one monthly payment.

Consumer credit agreements

A consumer credit agreement is a document that records the terms and conditions of an agreement between a creditor and a debtor, where the borrower is a consumer.

The rules on consumer credit agreements apply to almost all credit agreements, hire-purchase agreements and consumer-hire agreements. They apply to agreements to borrow money which you make with banks, building societies, moneylenders and certain other finance companies. They do not apply to agreements to borrow money from credit unions, pawnbrokers and utility service providers or to agreements entered into by businesses.

Agreements covered by the consumer credit legislation must be in writing. If they are not in writing, they are not enforceable. The legislation provides that it is an offence for a creditor to demand payment if the agreement is not enforceable.

The Central Bank’s Consumer Protection Code applies to most consumer credit agreements.

Contracts

In a debt context, a contract is an agreement by one party to provide goods or services for another in return for payment. In general, contracts do not have to be in writing to be enforceable. However, contracts for the sale of land and contracts governed by the Consumer Credit Act 1995 must be in writing to be enforceable.

Not paying is a breach of the contract. Contracts may have penalty clauses for not meeting the terms of the contract. So, for example, the contract may say you must pay an extra charge or interest if you don't pay on time.

Court judgment

A Court judgment may state that you owe a debt. Debt judgments can then be enforced in various ways.

Credit history

Your credit history is information held on the Central Credit Register or Irish Credit Bureau’s database about credit agreements and your repayment history.

Your credit report is available for lenders to consult when they are considering a loan application. It is used to help lenders assess the ability of borrowers to repay any future debts.

Creditor

The creditor is the person (or company) who you owe money to. This person is known as the judgment creditor if judgment is awarded against you in court.

Debt forbearance and forgiveness

Debt forbearance is the term that is sometimes used by creditors when they agree to change how your debt will be repaid, for example, by postponing some payments or by changing the plan for repayments. You continue to owe all the money and you will eventually have to repay it all.

Debt forgiveness or cancellation occurs when your creditor decides not to collect the debt.

Debt management firms

A debt management firm provides services that include:

• Assessing a borrower’s financial circumstances
• Giving advice about how to resolve a borrower’s debts
• Negotiating with creditors on behalf of borrowers

There are a number of private commercial debt management firms, which are regulated by the Central Bank. The Central Bank has published a Consumer Guide to debt management services (pdf).

The Money Advice and Budgeting Service (MABS) is a non-commercial body providing debt management services and it does not charge fees.

Debt Relief Notice (DRN)

The Debt Relief Notice is a debt solution designed for people who have very low disposable income or assets. It allows for the write-off of qualifying debt up to €20,000, subject to a 3-year supervision period.

Debt Settlement Arrangement (DSA)

The Debt Settlement Arrangement is a debt solution for unsecured debts, usually over a period of 5 years. (See Secured loan below for definition.) The limit of 5 years can increase to 6 years in some situations. When the DSA concludes successfully, the debts that it covers will be fully settled.

Debtor

You are a debtor if you owe money to someone. If a court judgment is awarded against you, you are a judgment debtor.

Debts and criminal offences

Most debts arise because you have failed to meet the terms of a contract. For example, you borrow money from the bank or credit union and you don't pay it back, or you enter into an agreement to buy equipment by instalments and you don't pay. It is a breach of contract to not pay your debts - it is not generally a criminal offence.

However, it is a criminal offence to not pay certain debts. For example, it is an offence not to pay your taxes or your TV licence fee. You may be charged and convicted for failure to pay such debts. Even if you are charged, convicted and fined, you still owe the debt and can be sued for it in the normal way.

Excluded and excludable debts

The Personal Insolvency Act 2012 sets out certain types of debt that cannot be written off by a Debt Relief Notice, a Debt Settlement Arrangement or a Personal Insolvency Arrangement. These are called excluded debts and are debts due:

• Under family law orders, such as maintenance orders for spouses and children
• Under court awards for personal injury or death
• From a loan (or forbearance of a loan) got by fraud
• Under court orders made under the Proceeds of Crime Acts or fines imposed by the courts for criminal offences

The types of debt that may be written off are called excludable debts and are:

• Taxes, duties or levies owed to the State, such as income tax, the Local Property Tax, VAT, capital taxes
• Service charges owed to local authorities
• Rates
• Money owed under the Nursing Homes Loan
• Money owed to the Department of Social Protection
• Debts due to owners’ management companies in respect of annual service charges or contributions due for multi-unit developments (this is the only non-State debt in this category)

Mortgage arrears

Mortgage payments that a person has not paid by the time they are due. See also ‘Arrears’.

The Central Bank has an infographic on mortgage arrears.

Mortgage Arrears Resolution Process (MARP)

Under the Central Bank's Code of Conduct on Mortgage Arrears (CCMA) (pdf) mortgage lenders must operate a Mortgage Arrears Resolution Process (MARP) when dealing with borrowers in mortgage arrears or in pre-arrears. The 4 steps of the MARP are: communication; financial information; assessment; and resolution.

Personal insolvency

There are 3 debt resolution mechanisms for people who cannot afford to pay their personal debts:

• Debt Relief Notice (DRN) 
• Debt Settlement Arrangement (DSA)
• Personal Insolvency Arrangement (PIA) 

These arrangements offer different solutions to people in different situations. Read more about these personal insolvency options.

Personal Insolvency Arrangement (PIA)

If you cannot pay your personal debts a Personal Insolvency Arrangement can provide an agreed settlement and/or restructuring of secured debts up to a total of €3 million (as well as unsecured debts) over a period of 6 years. The cap of €3 million can be increased by agreement with your secured creditors and the limit of 6 years can increase to 7 years in some situations.

Personal Insolvency Practitioner (PIP)

A Personal Insolvency Practitioner (PIP) is a professional who is authorised by the Insolvency Service of Ireland (ISI) and will act on your behalf throughout a Debt Settlement Arrangement or a Personal Insolvency Arrangement.

Prescribed Financial Statement

A Prescribed Financial Statement (PFS) is a written statement of a debtor’s financial affairs. Every applicant must complete a PFS with the help of an Approved Intermediary (for a Debt Relief Notice) or a Personal Insolvency Practitioner (for a Debt Settlement Arrangement or Personal Insolvency Arrangement).

The PFS is used to:

• See if you are eligible for a debt resolution mechanism
• Calculate the contribution to be paid to your creditors over the period of a Debt Settlement Arrangement or Personal Insolvency Arrangement.
• Find which debts will no longer apply at the end of an arrangement

Priority debt

The term priority debt can be used in a general sense but it can also have a specific legal meaning. If you owe money to a number of creditors, you have your own view of which of these debts take priority. Most people would regard the repayments on their home as taking priority over the repayment of some other loans.

The legal meaning of priority debt may be different. For example, in receiverships, liquidations and bankruptcy, the law sets out the order in which the debts must be paid.

Protective certificate

This is a certificate issued by a court to protect the debtor against legal proceedings by a creditor while a Personal Insolvency Arrangement (PIA) or a Debt Settlement Arrangement (DSA) is being put in place.

The protective certificate gives you 70 days during which your creditors must not:

• Start or continue legal proceedings in respect of the debt
• Take or continue any steps to enforce a judgment or contact you about the debt unless you agree to this
• Start or continue bankruptcy proceedings against you.

Qualifying debt

Qualifying debts are debts that can be included in a Debt Relief Notice. Examples of qualifying debts are credit cards, overdrafts, personal loans, moneylender loans and arrears on utility bills or rent payments. To apply for a Debt Relief Notice, you must have €35,000 or less of Qualifying Debts.

Reasonable living expenses

You are entitled to a reasonable standard of living while you address your debt problems. Reasonable living expenses is a term used by the Insolvency Service of Ireland (ISI) to refer to the amount of money needed for you and your household to have a reasonable standard of living. This minimum standard of living allows for expenses such as food, clothing, health, education, transport, childcare and insurance.

The ISI has prepared detailed guidelines on what constitutes reasonable living expenses.

Repayment arrangement

A repayment arrangement is a voluntary agreement between a debtor and one or more of their creditors, about how they will repay their debt. It is sometimes called an alternative repayment arrangement (ARA) or a debt repayment plan.

You should get all arrangements in writing and keep copies for your records. Let your creditors know if you cannot keep up the repayments as agreed, as you may be able to renegotiate the terms of your arrangement.

Repossess

This means to take back ownership of something. For example, a home repossession is when a mortgage provider takes over a person’s home because they have failed to pay back their mortgage on time.

Secured loan

If a loan is secured it means that property or goods are provided as security against non-payment. Mortgages are the most common secured loans. Sometimes, business loans and other loans are also secured against property.

In general, debts such as bank loans and credit card debt are unsecured. However, if you decide to roll up such loans into your mortgage, they become secured loans.

If the property or goods on which the security is based are subsequently sold, the secured loan must be paid off before the proceeds can be used for any other purposes.

Simple contract debt

If you have a debt because you have not paid for goods or services that are not covered by any special rules, this is called a simple contract debt. For example, if you buy goods using a cheque and the cheque is not honoured, there is a simple contract debt to the seller. If you use the services of a plumber and do not pay him, there is a simple contract debt to the plumber. The seller or the plumber can go to court to get judgment against you and then enforce that judgment.

A range of legislation provides that various fees and levies which have not been paid may be dealt with in court in the same way as simple contract debts.

Sheriff

Sheriffs are self-employed people who enforce debt judgments. Sheriffs can collect outstanding debts from you by seizing your property or goods. Sheriffs operate in counties Cork and Dublin. County Registrars enforce debt judgments in all other places. Sheriffs are paid for their enforcement work on a commission basis.

As well as County Sheriffs in Cork and Dublin, Revenue Sheriffs enforce debts owed to the Revenue Commissioners. They have the power to collect tax debts. They can do this on the basis of a certificate of liability issued by the Collector General and do not need a court order. Revenue debts can also be collected in the normal way if there is a court order.

Standard Financial Statement

A Standard Financial Statement (SFS) is a summary of your finances that you can use to explain your financial circumstances to a creditor and agree a repayment plan.

The Central Bank has a consumer guide (pdf) to completing an SFS.

Time limits (Statute of Limitations)

There are time limits (limitation periods) for taking most types of court action.

The law in relation to time limits is complex but, in general, there is a time limit of 6 years for taking actions for:

• Breach of contract (for example, failure to pay for goods or services provided)
• Debt judgments
• Non-payment of charges such as rent

If your creditor does not start the court action within 6 years of the debt being due, the action can be held to be statute-barred by the court. However, you must raise the fact that the creditor’s action is statute barred and win. If you win, this effectively means that you cannot be forced by the court to pay the debt even though the debt still exists.

If your creditor gets a judgment, then, in general, they have 12 years to enforce that judgment.

Unsecured loan

This is a loan that is not attached to any asset, for example credit card debt or a personal loan.

If a person does not repay their loan, the lender is not allowed take any of their assets without taking the person to court to get an enforcement order for the Sheriff. However, the lender still has a legal right to recover the debt and can do so by taking the debtor to court.