A
Absolute Insolvency - The debtor's condition if debts exceed the total value of assets. It is not as precise as it may seem because it may not be possible to determine the value of the assets until they are actually sold or realised. It is possible for an 'absolutely insolvent' person to still meet their debts or instalments on debts when they are due for payment (for example, when a couple's mortgage far exceeds the value of their assets, they may be quite able to meet the monthly payments out of their current income
Act and Warrant - A document issued by the court formally vesting a debtor's estate in a permanent trustee.
Accruals Accounting - A method of recording expenditure as it is incurred and income as it is earned during an accounting period. By contrast cash accounting records cash payments and receipts when they are made or received.
Administration Costs - Expenditure (and related income) that as a general rule is concerned with items such as staff costs and related overheads.
Apparent Insolvency - A legal term that means you are unable to pay your debts and that at least one of your creditors has taken legal action against you.
Assets (Finance Team) - Rights or other access to future economic benefits controlled by an entity as a result of past transactions or events. Fixed Assets are assets with an expected life of more than 1 year held for use on a continuous basis eg land and buildings, patents. Current Assets include cash or other assets which can reasonably be expected to be converted to cash in the normal course of business, including stocks, debtors accrued income and payments in advance.
Attachment - Attachment prevents you from selling your possessions and can lead to a Messenger at Arms or Sheriff Officer taking the items to sell at auction to recover the money owed to your creditor. Usually, a creditor cannot attach items kept in your home or items essential to your trade or profession but there are exceptions to this.
Award (of sequestration) - The court order declaring a person to be bankrupt and sequestrating their estate.
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BACS Transfers - 3 day electronic payments and receipts, processed via BACS Ltd (formerly known as Bankers' Automated Clearing Services).
Bankruptcy - Formal court process which transfers your property to a trustee.
Bankruptcy Restriction Order (BRO) - New for Bankrutpcy Reform. Restrictions placed on a bankrupt person if the trustee believes they are misbehaving. Restrictions are imposed by the Sheriff on the debtor's credit and work activity and can last for 2 -15 years. BRO/BRUs apply restrictions to a debtor's credit and work activities for between 2 and 15 years after the BRO/BRU is granted. Details of a debtor's BRO/BRU will be recorded on the Register of Insolvencies.
Bankruptcy Restriction Undertaking (BRU) - New for Bankrutpcy Reform. If the debtor acknowledges that their conduct was inappropriate, they may agree to enter into a Bankruptcy Restrictions Undertaking (BRU). This has the same effect as a BRO but does not involve going to court. The period of the BRU may be shorter than if the court imposes a BRO. By entering into a BRU you avoid having to go to court.
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Capital Charge - An annual charge reflecting the consumption of fixed assets (depreciation) and the opportunity cost of tying up funds in such assets (cost of capital).
Capital Expenditure - Expenditure incurred in the creation or enhancement of a fixed asset.
CHAPS transfers - Same-day, sterling, electronic payments and receipts, processed via the Clearing House Automated Payment System.
Charge for Payment - The formal demand for payment following a decree. A Sheriff Officer usually serves it on you and you have to pay the debt within 14 days.
Commissioner - A creditor or their representative elected by the statutory meeting of creditors to represent the general body of creditors and to supervise the permanent trustee on its behalf.
Consignation - A form of deposit receipt whereby money is lodged in a Head Office bank account pending an order of the court or until the person entitled to it claims it.
Court of Session - Scotland's supreme court; the highest civil court in Scotland.
Creditor - Any person, business or organisation which is owed money by another.
Current Liabilities - Liabilities incurred in the normal course of business which fall due within one year and include creditors, accrued expenditure and deferred income.
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Debt Arrangement Scheme - A brief debt management tool introduced by the Scottish Government and accessed through an approved money advisor (see www.moneyscotland.gov.uk). It may help you if you have one or more debts and want to pay what you owe by giving more time for repayments free from the threat of enforcement (diligence) or bankruptcy.
Debtor - Any person who owes money to another. In AiB 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 might follow court action such as: a small claim up to £750; summary cause £750-£1500 or ordinary action, more than £1500.
Decree of adjudication - Adjudication is an action in the Court of Session where property you own which can be inherited, usually a house or similar, is transferred to a creditor to pay a debt.
Depreciation - The measure of the value of a fixed asset that has been consumed during a period whether arising from use, passage of time or obsolescence. The term amortisation is used in relation to intangible assets.
Diligence - Various forms of legal process taken by creditors to enforce repayment of overdue debts.
Discharge - The formal termination of a legal office or state, e.g. interim and permanent trustees may apply to be formally discharged once their functions are completed. A debtor is also discharged from bankruptcy, usually 3 years after the date of their sequestration. From 1 April the date of discharge will be one year after the date of sequestration.
Dividend - The distribution of funds to creditors in a sequestration. Also, the proportion of the debt repaid to a creditor in a sequestration; expressed as x pence in the £.
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Edinburgh Gazette - An official newsletter published twice weekly for the government by the Stationery Office in which various official announcements are recorded. Awards and certain other actions in the sequestration process are required to be published in the Gazette. Trust deeds are also advertised.
Electronic Payments - Payments such as BACS and CHAPS, which can be made electronically without a payable instrument.
Estate - Your estate is literally everything of value you own, including any rights you may have to receive money or goods from anyone else.
Executive Agency - A discrete unit set up to undertake an executive function of government.
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F
Financial Reporting Standard (FRS) - An accounting standard issued by the Accounting Standards Board, which forms part of generally accepted accounting practice (GAAP).
First Order - (see Warrant to Cite).
Framework Document - A document setting out the key principles of accountability for Executive Agencies.
Fraud Policy Statement - A statement communicating the approach to fraud.
Fraud Policy Plan - A written plan for timely and effective action in the event of a fraud.
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G
Government Procurement Card (GPC) - A corporate charge card used for the purchase of low-value items.
Gratuitous Alienation - A transfer of property by a debtor to another person for free or for less than it is worth. The permanent trustee can challenge any alienations which took place in the 5 years before the date of sequestration.
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H
Heritable Property - Property in the form of land, houses, and buildings, so called because it passed under the former law to the heir on the owner's death.
High Court of Justicary - The highest criminal court of Scotland
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I
Income Payment Agreement (IPA) - New for Bankrutpcy Reform. Process for obtaining contributions from a debtor's income during their bankruptcy. The contributions are agreed between AIB and debtor.
Income Payment Order (IPO) - New for Bankrutpcy Reform. If the debtor was not willing to make contributions then an IPO may be placed on them by AiB. This is an order for them to contribute to their debt.
Inhibition - Inhibition allows your creditor to stop you selling, transferring, or re-mortgaging your house or land unless you pay your debt to them. It does not allow your creditor to sell your property
Insolvency Practitioner - A person (usually, but not necessarily, a chartered accountant) licensed and authorised to act as a trustee in sequestrations or trust deeds and also as liquidator, administrator, or receiver of a limited company.
Interim trustee - Someone appointed by the court to handle your estate until a permanent trustee is appointed.
Interlocutor - An order or decision of the court, usually in response to a Note or Application.
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J
K
L
Liabilities - Obligations to transfer future economic benefits as a result of past transactions or events. Current Liabilities are liabilities incurred in the normal course of business, including creditors, accrued expenditure and receipts in advance.
Low Income Low Assets (LILA) - New for Bankruptcy Reform. Introduced to provide debt relief to debtors who cannot enter into bankruptcy using the current process. Many debtors find that their creditors are unwilling to take the legal action required to bring about their bankruptcy because of the administrative and legal costs incurred, often without the creditor receiving any dividend at the end. This means that many of the poorest debtors, who are in most need of debt relief, are unable to get it.
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M
Messenger at Arms - Messenger at Arms is an officer of the Scottish Court of Session. They are responsible for serving documents and enforcing court orders throughout Scotland.
Moveable Property - All property not classed as heritable. Moveable property (property that has a physical existence) such as furniture, vehicles and animals can be handled or moved. Moveable property which has a legal but no actual physical existence, such as debts and company shares, is classed as incorporeal property.
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N
Net Cash Requirement (NCR) - The amount of cash required to carry out the functions specified in the Budget Act / Budget Documents. It represents the sum of net resources and net capital, from which non-cash items, capital charges, depreciation etc. are removed and in which working capital, increases/decreases in stocks, debtors and creditors and provisions are taken into account.
Net Resources Requirement (NRR) - The total amount of resources required to carry out the functions specified in the Budget Act / Budget Documents. Resources comprise cash and non-cash elements.
Note (to Court) - An incidental application or report to the court in an existing process, for example, a sequestration process.
Notional Expenditure - Expenditure which does not involve an actual cash transaction but which must be reflected in the accounts to show the full costs of a body's activities.
Notional Cost of Capital - The notional cost of borrowing, usually set at 3.5 per cent.
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O
Office of the Paymaster General (OPG) - The UK government Department responsible for discharging the Paymaster General's statutory responsibilities to hold accounts and make payments for Government Departments and other public bodies.
OPG transfers - Transfers between OPG accounts.
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P
Payable Instruments - Cheques, payable orders and other items of paper which give the intended recipient an entitlement to money.
Payable Orders - Equivalent to cheques, but drawn on government office holders, such as the OPG, rather than a bank.
Payment Cards - Cards which can be used for payment purposes, there being several types including charge cards (such as the Government Procurement Card), credit cards and debit cards.
Permanent Trustee - Someone appointed by the court to take possession of your estate; sell any property you own and pay your creditors as much as possible of what you owe them.
Petition - A The legal term for a formal application to the court (sometimes referred to in the Sheriff Court as an Initial Writ).
Practical Insolvency - Insolvency can simply mean an inability to pay debts or instalments on debts as they become due. This is more precisely defined as simple or practical insolvency. A debtor can be practically insolvent without any formal legal steps being taken, and even though they could, given time, realise sufficient assets to pay all the debts. Although debtors may have no cash, they may have assets, the value of which equals or exceeds the amount of their debts. If such a debtor was to borrow money against their assets, for example, by increasing their mortgage or by selling some of their assets for cash, they might then be able to meet their current obligations and would no longer be practically insolvent.
Protected Trust Deed - A trust deed transfers all of your estate to a trustee and is not objected to by most of your creditors or by creditors to whom you owe at least one third of your debts. It is binding on all creditors that is 'protected' None of the creditors may then apply to have you sequestrated.
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Q
Qualified creditor or creditors - A creditor to whom you owe at least £1500 (or a number of creditors to whom you owe at least £1500 in total).
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R
Receiving order - A court order in England or Wales placing your assets under control of an Official Receiver.
Register of Insolvencies (ROI) - A public register in which are recorded details of all sequestrations awarded by Scottish Courts. It also contains details of protected trust deeds and details of companies in receivership or liquidation since 1 July 1999.
Resource Accounts - Prepared annually to present the financial results for the relevant year on the basis of GAAP and in accordance with the Resource Accounting Manual.
Resource Accounting - A set of accruals accounting techniques for reporting on expenditure and the relationship between expenditure and objectives.
Resource Accounting and Budgeting (RAB) - Introduces generally accepted accounting practice (GAAP) into government accounting. The main changes are the adoption of accruals accounting for expenditure and the inclusion of depreciation and cost-of-capital charges in budgets.
Resource Budget - The means by which the government plans and controls the expenditure of resources to meet its objectives.
Resource Budgeting - Involves using resource accounting information and principles as the basis for planning and controlling public expenditure.
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S
Scottish Administration - The Scottish Administration comprises the Scottish Government - Scottish Ministers (including the Lord Advocate and the Solicitor General for Scotland) and their staff i.e. Departments and Executive Agencies - plus junior Scottish Ministers and office holders of the Scottish Administration (i.e. the Registrar General of Births, Deaths and Marriages for Scotland, the Keeper of the Registers of Scotland, the Keeper of the Records of Scotland and the other office holders specified in statute. It also includes the staff of office holders.
Scottish Consolidated Fund (SCF) - The account in which draw-down of the Assigned Budget and other relevant receipts is held. Payments out of the SCF are subject to statutory authority while all receipts of the Scottish Administration (but not other direct funded bodies) must be paid into the SCF unless otherwise authorised by the Parliament.
Scottish Public Finance Manual (SPFM) - The Scottish Public Finance Manual (SPFM) is issued by the Scottish Ministers to provide guidance to the Scottish Government and other relevant bodies on the proper handling of public funds.
Sederunt Book - The official and permanent record of the sequestration process maintained by the permanent trustee.
Sequestration - The Scottish legal term for Bankruptcy.
Sequestration for Rent - A court process that can be raised against you by your landlord for rent you have not paid. (This is not the same as bankruptcy or formal sequestration.
Service Level Agreement (SLA) - An agreement between parties, setting out in detail the level of service to be performed under a contract.
Spending Review - Sets Departmental Expenditure Limit (and plans Annually Managed Expenditure) for the following three years. Normally held at 2 year intervals.
Standard Security - The legal instrument by which a secured debt is created.
Statutory Demand - A formal demand by a creditor giving you 21 days to repay a debt. The demand must be on proper form and be served by a Sheriff Officer. Failure to pay or to deny the debt makes the debtor apparently insolvent and liable to sequestration.
Statutory Meeting - The first meeting of creditors called by the interim trustee to elect a permanent trustee and commissioners.
Summary Warrant - An order granted by the court to local or public authorities giving the creditor authority to recover amounts of money you owe. This procedure is generally used to recover unpaid rates, taxes, community charge and so on.
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T
Trust - The vesting of certain funds, rights or interests in property in another person or persons (trustee(s)) to be applied or administered for the benefit of others (beneficiaries) in accordance with the terms of the trust.
Trustee - Person who administers your bankruptcy. Your trustee can be either the Accountant in Bankruptcy or a private insolvency practitioner (normally a chartered accountant who specialises in personal bankruptcy).
Trust Deed - A voluntary alternative to sequestration (bankruptcy). You can transfer all of part of your estate to a trustee to handle for the benefit of your creditors.
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U
Unfair Preference - A payment or obligation granted by a debtor to a particular creditor which is designed to defeat or prejudice the interests of other creditors.
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V
Vesting - A legal term meaning 'becoming the property of a person'. A debtor's sequestrated estates are 'vested in', that is, they become the property of the permanent trustee.
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W
Warrant to Cite - A court order authorising the petitioning creditor to cite the debtor to appear in court on a stated date to show that grounds for sequestration no longer exist. If the debtor fails to appear or fails to show that they hould not be sequestrated, sequestration will be awarded effective from the date the order was granted (see Award).
Working Capital - Current assets less current liabilities.
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X
Y
Z
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