Glossary of debt terms (2024)

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

Abhaile Scheme

Abhaile is a free scheme providing a comprehensive range of expert supportsto homeowners who are in mortgage arrears and at risk oflosing their homes. The Money Advice and Budgeting Service (MABS) acts as thegateway to providing this service. Readmore in our document on Abhaile.

Approved Intermediary

An approved intermediary is a person authorised by the InsolvencyService of Ireland (ISI) to support a debtor to make anapplication for a Debt Relief Notice(DRN).

Arrears

Arrears is a debt or payment that is not paid by the due date, or anotherterm for missed payments.

Bankruptcy

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

The purpose of the bankruptcy is to distribute your assets fairly among yourcreditors and protect you from thesecreditors. The distribution is done through a court official,the Official Assignee in Bankruptcy. Read more in our documenton bankruptcy.

Code of Conduct on Mortgage Arrears (CCMA)

The CCMA is a statutory code, issued by the Central Bank of Ireland, whichrequires mortgage lenders to adopt specific procedures when dealing withborrowers who are facing mortgage arrears. Under this Code,each lender must have a Mortgage Arrears Resolution Process(MARP). Readmore in our document on Consumer protection codes and mortgages.

Consolidation Loan

A consolidation loan is a new, single loan that combines (consolidates) morethan one outstanding debt. For example, a consolidation loan could combine yourcredit card debt, mortgage or rent arrears, loan repayments and household billsinto one monthly payment.

Consumer credit agreements

A consumer credit agreement is a document that records the terms andconditions of an agreement between a creditor (lender) and adebtor (borrower), where the borrower is a consumer.

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

Agreements covered by the consumercredit legislation must be in writing. If they are not in writing, they arenot enforceable. The legislationprovides that it is an offence for a creditor to demandpayment if the agreement is not enforceable.

The Central Bank’s ConsumerProtection Code applies to most consumer credit agreements. The ConsumerProtection Code for Licensed Moneylenders applies to moneylenders.

Contracts

In a debt context, a contract is an agreement by one party to provide goodsor services for another in return for payment. In general, contracts do nothave to be in writing in order to be enforceable. However, contracts for thesale of land and contracts governed by the ConsumerCredit Act 1995 must be in writing in order to be enforceable.

Failure to pay is a breach of the contract. Contracts may include penaltyclauses for failure to meet the terms of the contract. So, for example, thecontract may provide that you must pay an extra charge or you must pay interestif you fail to pay on time.

Court judgment

In this context, a Court judgment states that you owe a debt. That judgmentcan then be enforced in variousways.

Credit history

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

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

Readmore in our document on your credit record.

Creditor

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

Debt forbearance and forgiveness

Debt forbearance is the term that is sometimes used bycreditors when they agree to allow you to change the manner inwhich your debt will be repaid, for example, by postponing some payments or byrestructuring the manner in which repayments are made. You continue to owe allthe money and you will eventually have to repay it all.

Debt forgiveness or cancellation occurs when yourcreditor decides not to pursue the debt. Permanent debtforgiveness is rare. Some creditors may cease to pursue thedebt because they recognise that you will never be able to repay it but thatdoes not mean that the debt is forgiven or cancelled. If your circ*mstanceschange, you may still be pursued for it.

Debt management firms

A debt management firm is a company that charges to provide debt managementservices. Debt management involves:

• Assessing a borrower’s financial circ*mstances
• 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 areregulated by the Central Bank. The Central Bank has published its AuthorisationRequirements and Standards for Debt Management Firms (pdf). It has alsopublished a ConsumerGuide to debt management services (pdf).

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

Debt Relief Notice (DRN)

The Debt Relief Notice is designed for people who have very low disposableincome or assets. It allows for the write-off of qualifying debt up to€20,000, subject to a 3-year supervision period. Read more in ourdocument on Debt Relief Notices.

Debt Settlement Arrangement (DSA)

The Debt Settlement Arrangement applies to the agreed settlement ofunsecured debts, usually over a period of 5 years. (SeeSecured loan below for definition.) The limit of 5 years canincrease to 6 years in some situations. When the DSA concludes successfully,the debts that it covers will be fully discharged and the debtor will besolvent again. Read more inour document on Debt Settlement Arrangements.

Debtor

You are a debtor if you owe money to someone. If a court judgment is awardedagainst you, you are now 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 fail to payit back, or you enter into an agreement to buy equipment by instalments and youfail to pay. It is a breach of contract to fail to pay such debts - it is notgenerally a criminal offence.

However, it is a criminal offence to fail to pay certain debts. For example,it is an offence not to pay your taxes or your TV licence fee. You may becharged 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 thenormal way.

Excluded and excludable debts

The Personal Insolvency Act 2012 specifies certain types of debt thatcannot be written off by a Debt ReliefNotice, a Debt Settlement Arrangement or aPersonal Insolvency Arrangement. These are calledexcluded debts and are:

• Debts under family law orders, such as maintenance orders for spouses and children
• Debts due under court awards for personal injury or death
• Debts arising from a loan (or forbearance of a loan) obtained through fraud or similar wrongdoing
• Debts arising 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 calledexcludable 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 Support Scheme (in respect of a loan advanced by the HSE to a nursing home resident to cover the amount due from the principal private residence)
• 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. Seealso ‘Arrears’.

The Central Bank has created an infographicon mortgage arrears.

Mortgage Arrears Resolution Process (MARP)

Under the Central Bank's Codeof Conduct on Mortgage Arrears (CCMA) (pdf) mortgage lenders must operate aMortgage Arrears Resolution Process (MARP) when dealing with borrowers inmortgage arrears or in pre-arrears. The 4 steps of the MARP are: communication;financial information; assessment; and resolution. Readmore in our document on the Mortgage Arrears Resolution Process or theCentral Bank’s Consumerguide to the CCMA.

Personal insolvency

The PersonalInsolvency Act 2012 states that:

• “insolvent”, in relation to a debtor, shall be construed as meaning that the debtor is unable to pay his or her debts in full as they fall due

The Personal Insolvency Act 2012 introduced 3 debt resolution mechanisms forpeople who cannot afford to pay their personal debts. These arrangements offerdifferent solutions to people in different situations. Read more in ourdocument on these personal insolvency options.

Personal Insolvency Arrangement (PIA)

The Personal Insolvency Arrangement applies to the agreed settlement and/orrestructuring of secured debts up to a total of €3 million (as well asunsecured debts) over a period of 6 years. The cap of €3 million can beincreased by agreement with your secured creditors and thelimit of 6 years can increase to 7 years in some situations. Read morein our document on Personal Insolvency Arrangements .

Personal Insolvency Practitioner (PIP)

A Personal Insolvency Practitioner (PIP) is a professional who is authorisedby the InsolvencyService of Ireland (ISI) and will act on your behalf throughout aDebt Settlement Arrangement or a Personal InsolvencyArrangement.

Prescribed Financial Statement

A PrescribedFinancial Statement (PFS) is a written statement of a debtor’s financialaffairs. Every applicant must complete a PFS with the help of anApproved Intermediary (for a Debt ReliefNotice) or a Personal Insolvency Practitioner (for aDebt Settlement Arrangement or a Personal InsolvencyArrangement).

The PFS is used to:

• See if the applicant is eligible for a debt resolution mechanism
• Form the basis for calculating a sustainable contribution to be paid to the applicant’s creditors over the period of a DSA or PIA
• Identify the liabilities from which the applicant will be discharged at the end of an arrangement

Priority debt

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

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

Protective certificate

This is a certificate issued by a court to protect the debtor against legalproceedings by a creditor in respect of debts while a PersonalInsolvency Arrangement (PIA) or a Debt Settlement Arrangement(DSA) is being put in place.

The protective certificate gives you 70 days during which yourcreditors may 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 ReliefNotice. Examples of qualifying debts are credit cards, overdrafts,personal loans, moneylender loans and arrears on utility bills or rentpayments. 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 yourdebt problems. Reasonable living expenses is a term used by the InsolvencyService of Ireland (ISI) to refer to the amount of money needed for you andyour household to have a reasonable standard of living. This minimum standardof living allows for expenses such as food, clothing, health, education,transport, childcare and insurance.

The ISI has prepared detailed guidelines on what constitutes reasonable livingexpenses. These guidelines are regularly updated, as required under theAct. There is also an onlinecalculator.

Repayment arrangement

A repayment arrangement is a voluntary agreement between adebtor and one or more of their creditors,about how they will repay their debt. It is sometimes called an alternativerepayment arrangement (ARA) or a debt repayment plan. In the case of debt, arepayment arrangement is usually voluntarily made with yourcreditors to repay a debt in fixed amounts over a certain timeperiod, and depends on your abilty to pay. You should get all arrangements inwriting and keep copies for your records. Let your creditorsknow if you cannot keep up the repayments as agreed, as you may be able torenegotiate the terms of your arrangement.

Repossess

This means to take back ownership of something (for example, when a mortgageprovider takes over a person’s home because they have failed to pay backtheir mortgage on time). Readmore in our document on home repossessions.

Secured loan

This is a loan on which property or goods are available as security againstnon-payment. Mortgages are the most common secured loans. Sometimes, businessloans and other loans are also secured against property.

In general, debts such as bank loans and credit card debt areunsecured. However, if you decide to roll up such loans intoyour mortgage, they now become secured loans.

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

Simple contract debt

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

A range of legislation provides that various fees and levies which have notbeen paid may be dealt with in court in the same way as simple contractdebts.

Sheriff

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

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

Standard Financial Statement

A Standard Financial Statement (SFS) is a written statement of financialaffairs on an industrystandard format (pdf), which a borrower in mortgage difficulty mustcomplete as part of the Mortgage Arrears Resolution Process(MARP). The lender must give the borrower an SFS form and must ensurethat the borrower understands the MARP process. It must offer help withcompleting the SFS and mention sources of independent advice, such as MABS.

It then uses the financial information on the form to assess theborrower’s financial position and identify the best course of action. TheCentral Bank has a consumerguide (pdf) to completing an SFS.

Time limits/Statute of Limitations

There are time limits (limitation periods) for taking most types of courtaction. These time limits are set either in the Statute ofLimitations 1957, as amended, or in specific legislation dealing with thecourt issue involved.

The law in relation to time limits is complex but, in general, the timelimit for taking actions for breach of contract (for example, failure to payfor goods or services provided), for debt judgments and for non-payment ofcharges such as rent is 6 years. If your creditor does notstart the court action within 6 years of the debt being due, the action can beheld to be statute-barred by the court. However, you must raise thefact that the creditor’s action is statute barred and win. If you win, thiseffectively means that you cannot be forced by the court to pay the debt eventhough the debt still exists.

If your creditor gets a judgment, then, in general, theyhave 12 years in which to enforcethat judgment.

Unsecured loan

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

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