Glossary of Debt Related Terms
Below are some of the words and phrases you'll likely hear at one time or another when learning about debt negotiation and settlement:
Arbitration
A meeting with the debtor, lenders, and a third party. This is done to see if an agreement can be met without going to trial.
Your capability of meeting your debt obligations.
Attachment
The courts seize a debtor's property.
Balance
Money owed on an existing loan.
Bankrupt
When someone has declared insolvent in a court of law. Most debts are forgiven and most assets are turned over to the court.
Credit score
A rating banks and financial institutions used to evaluate a persons ability to pay back a loan.
Chapter 7 Bankruptcy
A person goes to bankruptcy court where most debts are forgiven and most assets are seized.
A person goes to bankruptcy court where they are told to setup a repayment schedule for paying off existing debts.
Credit counseling
A debt relief solution where you will work with your creditors via lower rates and a repayment plan.
Cancellation of debt
Where a creditor forgives debt owed.
Capital
Assets of money of a person or company.
Debt
An amount of money owed to a lender include interest and fees.
Debt Advice
When someone uses a financial expert to pay off debt.
Debt relief
A reduction of debt owed via settlement, consolidation, or similar debt programs.
Debt settlement
A form of debt relief where you work with your creditors and agree to a lesser amount owed.
Debt consolidation
A lower interest loan that is secured by a mortgage that is used to pay off high interest debts.
Debt management
A service where a company will help a person manage debt via a settlement or consolidation program.
Debt Elimination
A term used for when someone becomes debt free.
Debt Help
Used to describe services that help in dealing with debt.
Default
Missing a payment of an existing loan.
Exemptions
When property or money is declared exempt from a creditors ability to seize in court.
Equity
Value of property less the money owed on the mortgage.
Floating debt
Refinanced short term debt.
Funded debt
Loans longer than a year.
Garnishment
When a creditor has a court approve the creditors ability to take money owed via the debtor's employer or bank account.
Insolvent
Unable to meet debt obligations.
Interest
The fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal; the rate is dependent upon the time value of money, the credit risk of the borrower, and the inflation rate.
Judgment
In the event you are sued and lose the case, the creditor wins a judgment, which allows them to garnish your wages, put a lien against your property, or levy your bank account depending on your state laws.
Lien
A notice associated to your property that you owe a lender.
Levy
The same as garnishment but used on bank accounts.
Legal assets
Any property that can be used for repayment of a debt.
