Debt Glossary

Glossary of Loan Terminology

A

assets

Every form of property owned by a debtor.

automatic stay

A stay imposed by the court when a bankruptcy is filed that prevents creditors from taking collection actions against the debtor.

B

bankruptcy

When a debtor who owes more than his or her assets relieves the debts by transferring his or her assets to a trustee and is relieved of the future obligation to repay unsecured debts.

C

chapter 7

This is a type of bankruptcy in which a debtor’s assets are liquidated to satisfy credit obligations, which are removed at the completion of bankruptcy.

chapter 13

This type of bankruptcy allows a person to retain assets in exchange for making reduced payments in accordance to a trustee-approved plan.

collateral

An item of value that guarantees payment of debt or may be collected in place of payment.

collection agency

A third party agency creditors use to collect debt. Sometimes a collection agency is a company set up by the creditor to collect debt. Also called a Credit Agency.

consumer report

Also called a “credit report,” a factual record of an individual’s credit payment history. Its main purpose is to help a lender quickly and objectively decide whether to give the consumer credit. A credit report is used to develop a credit score, but does not contain the score itself.

consumer reporting agencies (CRA)

Companies that gather and sell information about where a consumer works and lives, how they pay their bills, and whether they’ve been sued, arrested, or filed for bankruptcy. The most common type of CRA is a credit bureau. The information CRAs sell about the consumer to creditors, employers, insurers, and other businesses is called a Consumer Report or a Credit Report.

cosigner

A person who officially undertakes responsibility for a loan in the event of the borrower’s default.

credit agency

A third party agency creditors use to collect debt. Sometimes a credit agency is a company set up by the creditor to collect debt. Also called a Collection Agency.

credit bureaus

Private, for-profit companies that gather information about a consumer’s credit history and sell it to banks, credit card companies, landlords, employers, and other interested parties.

credit counseling service

Companies that provide debt management plans and budget counseling, usually in return for fees.

credit history

A record based on information supplied over time by creditors with whom consumers have done business. This information is reflected in a credit report.

creditor

A person or business who extends credit and to whom money is owed.

credit report

Also called a Consumer Report, a factual record of an individual’s credit payment history. Its main purpose is to help a lender quickly and objectively decide whether to grant a consumer credit. A credit report is used to develop a consumer’s credit score, but does not contain the score itself.

credit score

Credit scores provide a numerical representation of a consumer’s credit at a given point in time. Credit scores are calculated using data contained in a consumer’s credit report. The score assesses the likelihood that a borrower will repay a loan or credit card

D

debt load

The total amount of money the consumer owes.

debt management plan

A plan that helps consumers repay their debts and helps creditors collect the money owed them. Usually put together by a Credit Counseling Agency.

debtor

Someone who uses credit cards, owes money on a personal loan or is paying on a home mortgage.

debt collector

Someone who regularly collects debts owed to others. This includes attorneys who collect debts on a regular basis.

default

Occurs when a borrower fails to repay a debt obligation in accordance with its terms.

dischargeable debt

A debt that can be eliminated in bankruptcy.

E

exemptions

Property that is legally beyond the reach of creditors or a trustee.

I

interest

The percentage a creditor charges on money borrowed.

L

loan

An arrangement whereby a creditor gives a company or an individual money and arranges for them to pay it back on a timeline, usually with interest.

N

non-dischargeable debt

A debt that cannot be eliminated in bankruptcy.

P

petition

The document that initiates a bankruptcy case.

S

secured debt

Debts linked to collateral. The collateral guarantees payment of the debt, or the creditor has a right to take the collateral. Secured debt is most commonly used when purchasing homes or cars.

T

trustee

A trustee is appointed in Chapter 7 and Chapter 13 bankruptcy cases to review the debtor’s schedules, manage payments, and generally represent the interests of the creditors in the bankruptcy case. The role of the trustee is different under different bankruptcy chapters.

U

unsecured debt

Debts with no collateral. Commonly used with credit cards, doctors’ bills, student loans, personal loans or rent.