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.

Action of Removing from Heritable Property - Gives authority to remove someone from property and includes recovering possession.

Adjudication for Debt - Process which give creditors a right over heritable property owned by a debtor.

Admiralty Arrestment - A process which allows the arrestment of ship and cargo for debts due.

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.

Arrestment - Process by which a creditor can seize a debtor's moveable property, where that property is in possession of a third party.

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) - Restrictions placed on a debtor if their trustee believes they misbehaved before, or during, their bankruptcy. A BRO is imposed by a sheriff and applies restrictions to a debtor's credit and work activities. The sheriff will fix the period of the restrictions and this can be for between 2 and 15 years after the debtor has been discharged from their bankruptcy. Details of a debtor's BRO will be recorded in the public Register of Insolvencies.

Bankruptcy Restriction Undertaking (BRU) - If the debtor acknowledges that their behaviour was inappropriate, either before or during their bankruptcy, they can agree to enter into a Bankruptcy Restrictions Undertaking (BRU). A BRU imposes the same restrictions as a BRO but does not require an application to a sheriff. The period of the BRU can be shorter than a BRO imposed by a sheriff. Details of a debtor's BRU will be recorded in the public Register of Insolvenices.

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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 debt management tool introduced by the Scottish Government and accessed through an approved money advisor (see 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.

Debtor's Dwellinghouse - A house which is the sole or main residence of the debtor.

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.

Demise Charter - A maritime term: a demise charter is the lease of a vessel in which all control is relinquished by the owner (to the charterer), and the charterer bears all expenses of operation. For example, sole control of crew and cargo, command and navigation. If the charterer may appoint his own crew, it is known as a bareboat charter, rather than a demise charter.

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.

Diligence Against Earnings - Legal process which allows a creditor to instruct a debtor's employer to make a deduction from the debtor's earnings.

Diligence on the Dependence - A measure which prevents the debtor from disposing of funds, goods or property while a legal action is ongoing.

Discharge - The formal termination of a legal office or state, e.g. trustees may apply to be formally discharged once their functions are completed. A debtor is also discharged from bankruptcy, usually 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. Previously, notifications of sequestration awards required to be published in the Edinburgh Gazette, however, this requirement ended on 15 Nov 2010. Details of all bankruptcies and protected trust deeds are published in the Register of Insolvencies.

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.

Exceptional Attachment - Attachment of non-essential assets belonging to a debtor and kept in a dwellinghouse.

Executive agency - A discrete unit set up to undertake an executive function of government.

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Financial Reporting Standard (FRS) - An accounting standard issued by the Accounting Standards Board, which forms part of generally accepted accounting practice (GAAP).

Fines Enforcement Officer - An official who collects and enforces fines, who is part of the Scottish Court Service.

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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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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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

Hypothec - A right in security given over the property of a debtor, although the creditor does not have possession of the subjects which remain with the debtor (unlike a pledge or lien). For example, a landlord has a hypothec over the moveable effects of a tenant brought onto leased premises, as security for rent.

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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 Attachment - Process (similar to diligence on the dependence) which restricts the debtor's ability to deal with a limited range of moveable assets in their possession while a court action progresses.

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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Land Attachment - Allows unsecured creditors to enforce debts by taking action against land (land including buildings and other structures).

Landlord's Hypothec - Gives a landlord a right in security over moveable property belonging to the tenant in let premises.

Land Register - Register of title to land.

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 Asset (LILA) - LILA is the route into bankruptcy introduced to provide debt relief to debtors who cannot afford to pay their debts and have low income and limited assets. 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.

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Maills and Duties - A process available to creditors where the property over which they have security is let and they receive the rental payments.

Mandate - A written authority to do something.

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.

Money adviser - Somebody trained to offer advice on debt usually at at local authority money advice unit or Citzens Advice Bureau.

Money Attachment - Allows a creditor to attach money which is held on a debtor's premises (but not in a dwellinghouse).

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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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.

Non Essential Assets - Coporeal moveable property of the debtor's which is kept in a dwellinghouse, as defined in Schedule 2 of the Debt Arrangement and Attachment (Scotland) Act 2002.

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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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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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 - 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 is a form of insolvency that transfers your estate to a trustee to be realised for the benefit of creditors. A trust deed may be protected as long as a majority in number or a third in value of creditors do not object to its terms. Once protected, the terms of the trust deed becoming binding on all the creditors.

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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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Receiving order - A court order in England or Wales placing your assets under control of an Official Receiver.

Register of Inhibitions and Adjudications - A public register of people who are unable to grant good title to their heritable property.

Register of Insolvencies (ROI) - A public register that records details of all sequestrations awarded in Scotland. It also contains details of protected trust deeds and details of companies in receivership or liquidation since 1 July 1999.

Residual Attachment - A mechanism for creditors to attach property not capable of attachment by any other type of diligence, e.g. copyright.

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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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.

Sheriff - The judge in a Sheriff Court who is an experienced solicitor or advocate appointed by the Queen.

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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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 or trust deed. In sequestrations your trustee can be either the Accountant in Bankruptcy or a private insolvency practitioner (normally a chartered accountant who specialises in personal bankruptcy). In trust deeds, trustees must be an insolvency practitioner.

Trust deed - A voluntary form of insolvency and an alternative to sequestration (bankruptcy). You can transfer all or part of your estate to a trustee to realise for the benefit of your creditors.

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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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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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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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