AiB 6 - Apparent Insolvency - Page 3

EXPLANATION OF TERMS

Apparent insolvency

A legal term that means the debtor is unable to pay their debts and that at least one of their creditors has taken legal action against them.

Charge for payment

The formal demand for payment following a decree. A Sheriff Officer usually serves it on the debtor who has 14 days to pay the debt.

Creditor

Any person, business or organisation the debtor owes money to.

Debt Arrangement Scheme

A free debt management tool introduced by the Scottish Executive accessed through an Approved money adviser (see www.moneyscotland.gov.uk). It assists people with two or more debts who want to pay what they owe by giving them more time, free from the threat of enforcement (diligence) or bankruptcy.

Debtor

Any person who owes money. In this booklet it means someone who is insolvent and is aiming to have their estate sequestrated.

Decree

A formal order of court which says the debtor must pay money to a creditor. This order can follow court action such as:

• small claim (up to £750);
• summary cause (£750 to £1500); or
• ordinary action (more than £1500).

Decree of adjudication

Adjudication is an action in the Court of Session (Scotland's Supreme Civil Court) where property the debtor owns which can be inherited, usually a house or similar, is transferred to a creditor to pay a debt.

Estate

This is literally everything of value the debtor owns, including any rights they may have to receive money or goods from anyone else.

Interim trustee

Someone appointed by the court to handle the debtor's estate until a permanent trustee is appointed.

Permanent trustee

Someone appointed by the court to:

> take possession of the debtor's estate;

> sell any property the debtor owns; and

> pay the debtor's creditors as much as possible of what they are owed.

Petition

A formal application to the court.

Protected trust deed

A trust deed which transfers all the debtor's estate to a trustee and is not objected to by most of their creditors or by creditors to whom the debtor owes at least one-third of their debts. It is binding on all the creditors, that is, 'protected'. None of the creditors may then apply to have the debtor sequestrated.

Qualified creditor or creditors

A creditor to whom the debtor owes at least £1500 (or a number of creditors the debtor owes at least £1500 in total).

Receiving order

An order of the court in England or Wales placing the debtor's assets under the control of an Official Receiver.

Sequestration

The Scottish legal term for bankruptcy. Bankruptcy is a formal court process which transfers the debtor's property to a trustee.

Sequestration for rent

A court process which the debtor's landlord can raise for rent not paid. (This is not the same as bankruptcy or formal sequestration.)

Statutory demand

A formal demand by a creditor giving the debtor 21 days to repay a debt. The demand must be on the proper form and be served by a Sheriff Officer.

Summary Warrant

An order granted by the court to local or public authorities giving the creditor authority to recover amounts of money the debtor owes. This procedure is generally used to recover unpaid rates, taxes, community charge and so on.

Trust deed

A voluntary alternative to sequestration. The debtor can transfer all or part of the estate to a trustee to handle for the benefit of their creditors.