Debt Terms & Definitions


ABILITY TO PAY: A borrower's capability of meeting his/her current and future debt obligations.
ACCELERATION CLAUSE: Allows the lender in a loan agreement to demand early payment, sometimes in full, for certain reasons, such as defaulting on the loan, destruction of property, or transfer of title.
ACCELERATED PAYMENTS: A term associated with making additional unscheduled payments on a loan at predetermined or random intervals. Making additional unscheduled payments reduces the principal balance of the loan, meaning that more principal and less interest is paid off in subsequent payments. Making accelerated payments will lead to the early pay-off of a loan.
ACCOMMODATION ENDORSEMENT: An endorsed note signed solely for the purpose of inducing a creditor to lend money to a borrower whose credit may or may not be substantial enough to warrant a loan.
ACCOUNT BALANCE: The amount of money in an account, equal to the net of credits and debits at that point in time for that account.
ACCOUNTS RECEIVABLE: Money which is owed to a company by a customer for products and services provided on credit. This is treated as a current asset on a balance sheet. A specific sale is generally only treated as an account receivable after the customer is sent an invoice.
ACCUMULATION PERIOD: For the purpose of debt settlement, period during which a client makes previously agreed-upon monthly deposits into their designated "savings" account.
ACCUMULATION PLAN: Also referred to as Cash Accumulation Plan.
ADDITIONAL INSURED: Other persons that are insured under a policy other than the person named to hold the contract.
ADDITIONAL PRINCIPAL PAYMENT: Extra money that is included in a monthly payment above what is necessary. It is applied to the outstanding balance and allows a debt to be paid off more quickly.
ADJUSTED BALANCE: The remaining balance on a debt after payments have been subtracted from the original balance, not including interest or fees. A consumer-friendly practice, it allows the interest rate to be based on the adjusted amount instead of on the original amount.
ADVERSARY PROCEEDING: A lawsuit filed in the bankruptcy court which is related to the debtor's bankruptcy case. Examples are complaints to determine the discharge-ability of a debt and complaints to determine the extent and validity of liens.
AGGREGATE LIMIT: Indicates how much coverage one is entitled to for a certain period of time, no matter how many accidents occur.
AMORTIZATION: The process of debt retirement or liquidation through systematic periodic payments. For example, most mortgage loans have monthly payments consisting of both principal and interest. Each month, the principal portion of the payment is applied to reduce the outstanding balance of the loan.
ANNUAL CONSTANT: The percentage which when applied directly to the face value of a debt develops the annual amount of money necessary to pay a specified net interest rate on the reducing balance and to liquidate the debt in a certain period of time.
ANNUAL PERCENTAGE RATE (APR): The cost of a loan expressed as a yearly rate. The monthly interest rate simply is the APR divided by 12. By law, creditors are obligated to reveal the APR.
ANNUITIES: Any recurring periodic series of payments.
ARREARS: The state of a payment that has not been made on time. Unpaid debts are said to accumulate as such.
ASSET: Anything owned by an individual or business, which has commercial or exchange value.
ASSETS, CURRENT: Those assets which are readily convertible into cash without substantial loss. Sometimes referred to as quick assets.
ASSETS, FIXED: Those assets which are not readily convertible into cash and in the ordinary course of business are not so converted such as real estate, leasehold improvements, natural resources, machinery, equipment, furniture, fixtures, etc.
ASSUMPTION: The responsibility for loan payments assumed by a party other than the original maker of the debt. In church lending, assumptions may occur when a church with a loan merges with another church and the other church assumes responsibility for the subject loan.
AUTOMATIC STAY: The injunction issued automatically upon the filing of a bankruptcy case which prohibits collection actions against the debtor, the debtor's property or the property of the estate. See Relief from Stay on terminating the injunction.
AVERAGE DAILY BALANCE: The amount computed by determining how much is owed on a debt for an average day during a particular billing period. It is the method by which most credit card companies and banks determine due interest.
AVOIDANCE: The Bankruptcy Code permits the debtor to eliminate (avoid) some kinds of liens that interfere with (or impair) an exemption claimed in the bankruptcy. Most judgment liens that have attached to the debtor's home can be avoided if the total of the liens (mortgages, judgment liens and statutory liens) is greater than the value of the property in which the exemption is claimed. This is sometimes called "lien stripping."


BAD CREDIT: Describes the status of someone who is considered a high risk for credit lenders. Variables which can lead to such a label include non-payments, late payments, overuse of credit, or filing bankruptcy.
BALANCE SHEET: An itemized listing of assets and liabilities for an organization or individual arranged and classified so as to permit determination of assets by class, liabilities by class and net worth. For non-profit organizations, net worth or equity is generally referred to as Fund Balance.
BALLOON NOTE: A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "balloon" is due at maturity.
BANKRUPTCY: A legally declared inability or impairment of ability of an individual or organizations to pay their creditors.
BANKRUPTCY CODE: Title 11 of the United States Code governs bankruptcy proceedings. Bankruptcy is a matter of federal law and is, with the exception of exemptions, the same in every state. When federal bankruptcy law conflicts with state law, federal law controls.
BANKRUPTCY COURT: A United States District Court, or the bankruptcy judges assigned to a given United States District Court that deals only with bankruptcy proceedings.
BANKRUPTCY DISCHARGE: A discharge in United States bankruptcy law, when referring to a debtor's discharge, is a statutory injunction against the commencement or continuation of an action (or the employment of process, or an act) to collect, recover or offset a debt as a personal liability of the debtor.
BANKRUPTCY ESTATE: The estate is all of the legal and equitable interests of the debtor as of the commencement of the case. From the estate, an individual debtor can claim certain property exempt; the balance of the estate is liquidated in a Chapter 7 to pay the administrative costs of the proceeding and the claims of creditors according to their priority.
BANKRUPTCY EXEMPTIONS: Exemptions are the lists of the kinds and values of property that is legally beyond the reach of creditors or the bankruptcy trustee. The debtor in bankruptcy keeps the exempt property. What property may be exempted is determined by state and federal statutes, and varies from state to state.
BANKRUPTCY TRUSTEE: The court appoints a trustee in every Chapter 7 and Chapter 13 case to review the debtor's schedules and represent the interests of the creditors in the bankruptcy case. The role of the trustee is different under the different chapters.
BILLING CYCLE: The amount of time between billing statement dates, usually about 25 days. BINDER - An agreement that states that insurance can be put into force before the contract has been written or the premium has been paid.
BREACH: The failure of performance by a party to a contract.
BUDGET PLAN: A systematic plan for the expenditure of a usually fixed resource, such as money or time, during a given period.
BUYDOWN: Lowering of the interest rate and/or monthly payments on debt due to a substantial additional payment while the debt is new. In other words, borrowers “buy” better rates.


CANCELLATION: What occurs when a policy is ceased by the insurer or the insured in compliance to what is outlined in the contract.
CANCELLATION OF DEBT: Release of a debt without consideration by a creditor.
CAPITALIZATION (Appraisal Usage): The process of converting an income stream or anticipated future income into an indication of value. Capitalization is used in the Income Approach value.
CAPITALIZE (Accounting Usage): To charge an expenditure to an asset account because it benefits a period in excess of one year. For example, a betterment to a machine would be capitalized to the machinery account.
CAPITAL STEWARDSHIP PROGRAM: Services offered through state conventions; para church organizations; and professional businesses. Program designed to increase designated giving toward a building project for a set period of time, usually three years. Church members individually pledge in advance set amounts of money toward the repayment of building-related debt. Each capital stewardship company is judged on its past success, and its ability to identify with the common goals and culture of the local church they are contracted by.
CASH ADVANCE LOAN: A loan that is granted to borrowers when a small amount of money is needed to cover funds until they receive their next paychecks. Once the paycheck is received, the cash advance loan must be repaid, often at a very high interest rate. Also known as a Payday Loan.
CASH FLOW: Undesignated (general) income that is available to pay the mortgage payment after deducting all fixed expenses except debt service expense. Fixed expenses include such items as salaries, benefits, utilities, taxes, insurance and any other non-discretionary continuing expense.
CHAPTER 11 BANKRUPTCY: A reorganization proceeding in which the debtor may continue in business or in possession of its property as a fiduciary. A confirmed Chapter 11 plan provides for the manner in which the claims of creditors will be paid in whole or in part by the debtor.
CHAPTER 12 BANKRUPTCY: A simplified reorganization plan for family farmers whose debts fall within certain limits.
CHAPTER 13 BANKRUPTCY: A repayment plan for individuals with debts falling below statutory levels which provides for repayment of some or all of the debts out of future income over 3 to 5 years.
CHAPTER 7 BANKRUPTCY: The most common form of bankruptcy; a Chapter 7 case is a liquidation proceeding, available to individuals, married couples, partnerships and corporations.
CHARGE-OFF: When a debt is considered uncollectible and is removed from active accounts, and when the balance due is removed from the record of the creditor’s assets. Payment may be demanded in full or negotiated to a lesser amount, or the account may be sold to a collections agency.
COLLATERAL: Marketable properties such as stocks, bonds, land, property, evidences of deposit and other securities which the borrower pledges as security for a loan.
COMMITMENT: A written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home.
CONDITIONALITIES: Additional requirements or responsibilities relative to a loan or debt other than simple repayment.
CONFIRMATION: The court order which makes the terms of the plan for repayment of debts in a Chapter 11, 12 or 13 binding. The terms of the confirmed plan replace the prepetition rights of the debtor AND CREDITOR.
CONFIRMED: A plan of reorganization in Chapter 11, 12 or 13 approved by the court and binding on the parties is said to be confirmed.
CONSUMER BANKRUPTCY: A legal debt relief option for those gravely in debt without other financial alternatives. A declaration that one cannot pay the debts for which he or she is liable, filing bankruptcy can discharge debts or reduce them within the context of a realistic payment plan.
CONSUMER DEBT: Debts incurred by an individual for personal, family or household purposes. Taxes are not consumer debts; neither are business loans. The means test only applies to those with primarily consumer debt.
CONSOLIDATION: Combining multiple loans into a single loan, often at a lower interest rate and with smaller monthly payments.
CONSTRUCTION LOAN: A business transaction between two legal entities whereby one party, known as a lender, agrees to loan funds to the second party, known as the borrower. The proceeds of this transaction will be used to build improvements upon land owned by the borrower. In most cases, the loan proceeds will be advanced in accordance with the corresponding progress of the completed improvements.
CONTINGENT: Used to describe debts that are not fixed in right at the time, but are dependent on some other event happening to fix the liability.
CONTRACT: A mutual agreement between two or more legal entities, which is enforceable at law.
CONVERSION: Cases under the Bankruptcy Code may be converted from one chapter to another chapter; for example, a Chapter 7 case may be converted to a case under Chapter 13 if the debtor is eligible for Chapter 13. Even though the chapter of the Code which governs it changes, it remains the same case as originally filed.
CREDIT: Funds provided from a lender to a borrower that must be repaid.
CREDIT BUREAU: A credit bureau (U.S.) is a company that collects information from various sources and provides consumer credit information on individual consumers for a variety of uses. This helps lenders assess credit worthiness, the ability to pay back a loan, and can affect the interest rate and other terms of a loan. Interest rates are not the same for everyone, but instead can be based on risk-based pricing, a form of price discrimination based on the different expected risks of different borrowers, as set out in their credit rating. Consumers with poor credit repayment histories or court adjudicated debt obligations like tax liens or bankruptcies will pay a higher annual interest rate than consumers who don't have these factors. Most consumer welfare advocates advise individuals to review their credit reports at least once per year, in order to ensure that the reports are accurate. Consumers can do so at no cost. They are entitled to a free annual credit report from each of the three nationwide consumer reporting agencies “ Equifax, Experian and TransUnion.
CREDIT COUNSELING: Professional advice given to consumers about financial planning, budget management, and methods of debt repayment. Also known as CCCA.
CREDIT ENHANCEMENT: The process of reducing credit risk by requiring collateral, insurance, or other agreements to provide the lender with reassurance that it will be compensated if the borrower defaulted.
CREDIT INSURANCE: A policy that protects the lender in the event that the borrower passes away, becomes unemployed, or becomes ill before the debt is fulfilled. Payment is made through the policy.
CREDIT LIMIT: The maximum amount of money that one may charge on a credit card, or may take out in a loan.
CREDIT LINE: The total of revolving credit that may be borrowed partially or in full against an account. Once the debt is repaid, the borrower may use that credit again, and may do so as many times as he or she wishes.
CREDIT RATING: A published ranking, based on detailed financial analysis by a credit bureau, of one's financial history, specifically as it relates to one's ability to meet debt obligations. The highest rating is usually AAA, and the lowest is D. Lenders use this information to decide whether to approve a loan.
CREDIT REPAIR: Credit repair is a three-part process. The first is obtaining and then fixing your credit report. The next is getting your finances organized in order to conquer debt. The final stage is then re-building your credit to the point where you are eligible for important secured loans such as a mortgage.
CREDIT REPORT: A document that records the credit history of a particular individual. Consumers have a report at each of the three main consumer credit agencies – Experian, Equifax, and TransUnion. It may be examined by creditors to determine credit worthiness.
CREDIT SCORE: A score between 300 and 900 that is determined by one's credit history, and is a representation of one's credit worthiness. It may be used by creditors to decide whether or not to extend credit, as well as what interest rate one may receive.
CREDITOR: The person or company to which borrowers owe money for goods or services, or for repayment of a loan. One who extends credit; the lender in a loan situation.


DEBT: Money that is owed to a person or a business in exchange for goods or services, or for repayment of a loan.
DEBT ARBITRATION: Industry created around the practice of debt settlement. Debt arbitrators are third-party institutions that work on behalf of their clients to negotiate out-of-court settlements for old bills, invoices, lawsuits, liens, medical bills, utility bills, judgments, and other types of significant debt. Typically, debt arbitrators are in lieu of credit counseling as a way to avoid bankruptcy.
DEBT CANCELLATION: Release of a debt without consideration by a creditor.
DEBT COLLECTION: Usually performed by a collection agency. The term collection agency is usually applied to third-party agencies, called such because they were not a party to the original contract.
DEBT COLLECTOR: A person who works in the in-house collections department of an original creditor or a collection agency to track down debtors and get them to pay what they owe. Debt collectors can be relentless, often using scare tactics, humiliation and repeated phone calls to extract payments or promises to pay.
DEBT CONSOLIDATION LOAN: A loan obtained to pay off multiple other loans. Such loans tend to have lower interest rates, and also allow the borrower to make only one payment per month instead of many.
DEBT CONSOLIDATION RISKS: Debt consolidation can solve some terminal credit situations but that is mainly because things couldn't be worse. Debt Consolidation can be very risky, if you are not careful enough when selecting your debt consolidation agency and you don't control the things they do with your finances, you may end up in a worse situation than when you started.
DEBT COUNSELING: Debt Counseling is the same as credit counseling. Debt Counseling is a process offering education to consumers about how to avoid incurring debts.
DEBT COUNSELING SERVICE: Also referred to as a Credit Counseling Service or Consumer Credit Counseling Service (CCCS).
DEBT ELIMINATION: Debt Elimination is a process that involves disputing debts and the validity of them.
DEBT FINANCING: Financing by selling bonds, bills or notes to individuals or institutions.
DEBT MANAGEMENT PLAN: A method of debt relief that involves formulating payment plans with one's creditors to pay down debts while sticking to a realistic budget. Credit counseling agencies often promote DMPs as the best alternative, and sometimes they are.
DEBT SERVICE: Amount of money needed to meet required fixed costs. Mortgage payments and related expenses.
DEBT SERVICE RATIO: The required annual debt payments divided by general income.
DEBT SETTLEMENT: A process of negotiating with creditors to accept payment that is less than the full amount of the debt owed. Funds accumulate in a special account until enough has been saved to pay off one creditor, and then the process repeats until the debts have been repaid.
DEBT-TO-INCOME (DTI) RATIO: A comparison of monthly expenses to monthly earnings expressed as percentages.
DEBTOR: The debtor is the entity (person, partnership or corporation) who is liable for debts, and who is the subject of a bankruptcy case.
In a Chapter 11 case, the debtor usually remains in possession of its assets and assumes the duties of a trustee. The debtor in possession is a fiduciary for the creditors of the estate, and owes them the highest duty of care and loyalty.
DEFAULT: Failure to pay as required by law or contract, such as in a mortgage or deed of trust agreement. Generally, a loan is considered in default if payment is 30 days past due, and collections actions may be initiated.
DELINQUENCY: Failure to make monthly payments on a debt on time.
DENIAL OF DISCHARGE: Penalty for debtor misconduct with respect to the bankruptcy case or creditors as a whole. The grounds on which the debtor's discharge may be denied are found in 11 U.S.C. 727. When the debtor's discharge is denied, the debts that could have been discharged in that case cannot be discharged in any subsequent bankruptcy. The administration of the case, the liquidation of assets and the recovery of avoidable transfers, continues for the benefit of creditors.
DISCHARGE: The legal elimination of debt through a bankruptcy case. When a debt is discharged, it is no longer legally enforceable against the debtor, though any lien which secures the debt may survive the bankruptcy case.
DISCHARGEABLE: Debts that can be eliminated in bankruptcy. Certain debts are not dischargeable; that it, they may not be discharged through bankruptcy or may only be discharged through Chapter 13. Family support and criminal restitution are examples of debts which cannot be discharged. Debts incurred by fraud can only be discharged in Chapter 13.
DISCOUNT: The amount of money or the percentage of the principal deducted from the face value of a note. For example, a loan fee of 2% on a $100,000 loan would amount to a discount of $2,000 if the fee is deducted from the loan amount.
DISMISSAL: The termination of the case without either the entry of a discharge or a denial of discharge; after a case is dismissed, the debtor and the creditors have the same rights as they had before the bankruptcy case was commenced. Dismissal is the penalty for many essentially minor infractions of bankruptcy procedures under the 2005 amendments.
DOMESTIC SUPPORT OBLIGATION: Debts for alimony, maintenance or support owed to child, spouse or governmental entity that paid for the support of the child or spouse. A new term introduced by the bankruptcy amendments of '05.



ELIGIBLE DEBT NEGOTIATION: As a general rule, any type of unsecured debt can be successfully negotiated. An unsecured debt is one that is not tied to a specific material item that could be repossessed by the creditor.
ELIMINATE DEBT: There are many steps that you can take to make certain that your debt does not get out of control. Here are a few that will bring you closer to your goal of debt free living.
EQUIFAX: Equifax Inc. (NYSE: EFX) is a consumer credit reporting agency in the United States, considered one of the three largest American credit agencies along with Experian and TransUnion. Founded in 1899, Equifax is the oldest of the three agencies and gathers and maintains information on over 400 million credit holders worldwide. Based in Atlanta, Georgia, Equifax is a global service provider with US $1.5 billion in annual revenue and 7,000+ employees in 14 countries.
EQUAL CREDIT OPPORTUNITY ACT: Federal law passed by Congress in 1974 that prohibits discrimination against credit applicants based on race, color, religion, national origin, sex, marital status, age, or public assistance.
EQUITY: Usually defined as the difference between the market value of a piece of property and any debts against it, such as outstanding mortgages, claims, liens, rights or liabilities. Equity in a home rises as such debts decrease and/or as the value of the property increases.
ESTATE: The interest, right or ownership in personal and real property.
EXEMPT: Property that is exempt is removed from the bankruptcy estate and is not available to pay the claims of creditors. The debtor selects the property to be exempted from the statutory lists of exemptions available under the law of his state. The debtor gets to keep exempt property for use in making a fresh start after bankruptcy.
EXEMPTIONS: Exemptions are the lists of the kinds and values of property that is legally beyond the reach of creditors or the bankruptcy trustee. The debtor in bankruptcy keeps the exempt property. What property may be exempted is determined by state and federal statutes, and varies from state to state.
EXPERIAN: Experian plc (LSE: EXPN), formerly known as CCN Systems, is a global credit information group, with operations in 36 countries. The company is part of the FTSE 100 Index. The company employs 15,500 people. Experian's corporate headquarters are in Dublin, Ireland with operational headquarters in Nottingham, England and Costa Mesa, California, U.S. The company's largest operation is Experian North America, a consumer credit reporting agency that is considered one of the three largest American credit agencies along with Equifax and TransUnion. As well as the US, Experian has operations in most European countries, Argentina, Brazil, Chile, South Africa, China, Japan and Australia.



FACE VALUE: The principal value or amount reflected on an instrument evidencing an obligation of debt.
FAIR CREDIT BILLING ACT: Federal law passed by Congress in 1975 to protect consumers from billing and computational errors. Additionally, it requires that payments be credited the day they are received. Consumers may sue if a creditor is in violation of the act.
FAIR CREDIT REPORTING ACT: An American federal law (codified at 15 U.S.C. § 1681 et seq.) that regulates the collection, dissemination, and use of consumer credit information.
FAIR DEBT COLLECTION PRACTICES ACT: The Fair Debt Collection Practices Act (aka FDCPA), 15 U.S.C. § 1692 et seq., is a United States statute added in 1978 as Title VIII of the Consumer Credit Protection Act. Its purposes are to eliminate abusive practices in the collection of consumer debts, to promote fair debt collection and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information's accuracy. The Act creates guidelines under which debt collectors may conduct business, defines rights of consumers involved with debt collectors, and prescribes penalties and remedies for violations of the Act. It is sometimes used in conjunction with the Fair Credit Reporting Act.
FICO CREDIT SCORE: FICO is the acronym for Fair Isaac Corporation, a publicly-traded corporation (under the symbol "FIC") that created the best-known and most widely used credit score model in the United States. The FICO score is calculated statistically, with information from a consumer's credit files. The FICO score is primarily used in credit decisions made by banks and other providers of secured and unsecured credit. Banks and other institutions using such scores as a factor in their lending decisions may deny credit, charge higher interest rates, demand more collateral, or require extensive income and asset verification if the applicant's FICO credit score is low.
FIDUCIARY: A person or other entity involving a relationship of trust or confidence, in which the person or party acts on behalf of another person or party.
FINANCIAL ADVISOR: A person or organization employed by an individual or mutual fund to manage assets or provide investment advice; also called financial advisor or investment advisor or investment counsel.
FINANCIAL INDEPENDENCE: Different people have different definition for financial independence. In the simplest sense, it means to have sufficient income to self-support. Some might add "comfortable" to self-support. For some, "self" includes family - parent, spouse, and children.
FINANCIAL STATEMENT: A series of documents prepared by or for an organization regarding its financial status as of a certain date. The financial statement includes, but may not be limited to, a balance sheet, profit and loss statement and other pertinent exhibits.
FIXED COSTS: Costs identified as regular and reoccurring expenses as projected in a church budget. Costs such as salaries, utilities, insurance premiums and contractual obligations.
FIXED INCOME: A security that pays a specific interest rate, such as a bond, money market instrument, or preferred stock.
FIXED INTEREST RATE: A loan or mortgage with an interest rate that will remain at a predetermined rate for the entire term of the loan.
FORECLOSURE: The legal process by which an owner's right to a property is terminated, usually due to default. Typically involves a forced sale of the property at public auction, with the proceeds being applied to the mortgage debt.
FUND BALANCE: Net worth or equity in the funds reflected on the balance sheet of a financial statement for a non-profit organization.



GARNISHMENT: A legal proceeding whereby money or property due a debtor but in the possession of another is applied to the payment of the debt owed to the plaintiff.
GENERAL CONTRACTOR: A person or business entity that supervises the erection of structures or other improvements.
GENERAL INCOME: A church's income which consists of undesignated income plus other ongoing income with demonstrated growth in each of the past three years. This income must come from church members and be used for budget expenses.
GENERAL UNSECURED CLAIM: Creditor's claim without a priority for payment for which the creditor holds no security (or collateral). If the available funds in the estate extend to payment of unsecured claims, the claims are paid in proportion to the size of the claim relative to the total of claims in the class of unsecured claims.
GRACE PERIOD: A period of time during which you are not required to make payments on a debt. For example, most credit cards give you a grace period of 20-30 days before you have to pay interest on the amount of your purchases. Cash advances, however, usually have no grace period; interest begins to accumulate from the date of the withdrawal, even if you pay your bills on time. Also, some student loans give you a grace period after graduating or dropping out of school. During this time, you are not required to make payments on your loan.
GRADUATED PAYMENT: A type of loan repayment schedule in which payments start out small and increase gradually over time.
GROSS INCOME: The total of all income of a person or entity during a period which is subject to tax after considering the allowable deductions and relief applicable to such income or person.
GROUND LEASE: A lease which provides for occupancy and use of a parcel of land.
GUARANTY: A three-party contract involving the promise of the guarantor to pay the debt in default of a borrower.



HARDSHIPS AND DEBT SETTLEMENT: Clients whom have lost their jobs and have no means of financial support have very good chances of reaching favorable settlements with their creditors. Also, clients experiencing divorce and medical issues which inhibit them from making their payments are highly likely to receive the desired results through debt settlement. Even people who are current on their bills but continually struggle to stay current may find that they also are candidates for a debt settlement program. Finally, those who are on a limited fixed income have very good chances of reaching positive settlement results. By no means are these the only legitimate hardships by which a settlement can be reached. Since each debt situation is unique to each client there may be other hardships which will also serve as being valid, therefore helping to reach a settlement with the creditors.
HARD LOAN: A hard money loan is a specific type of asset-based loan financing in which a borrower receives funds secured by the value of a parcel of real estate. Hard money loans are typically issued at much higher interest rates than conventional commercial or residential property loans and are almost never issued by a commercial bank or other deposit institution.
HAZARD INSURANCE: A form of insurance in which the insurance company protects the insured from certain losses, such as fire, vandalism, storms and certain other natural causes.
HIGHEST AND BEST USE: The legal, reasonable and probable use which will support the highest value of the property.



ILLIQUID: In the context of finance, absence of cash flow needed to fulfill financial debts and meet obligations. In the context of investments, describes a lightly traded investment such as a stock or bond that is not easily converted into cash.
IMPAIRED CREDIT: Result of a borrower's reduced credit rating.
IMPLICIT BANKRUPTCY COSTS: Opportunity costs incurred prior to the bankruptcy process such as the loss of sales or financing.
IMPROVED VALUE: The value of land when and if improved to its best or most appropriate use.
INCOME PROPERTY: Real estate purchased for the reasons of income generation.
INCOME TAX: A state or federal government's levy on individuals as personal income tax and on the earnings of corporations as corporate income tax.
INDEMNIFY: To guarantee against any loss which another might suffer. In bankruptcy, it is used to describe the undertaking of one spouse in a divorce to assume certain debts of the marriage and to see that the other spouse is not forced to pay. Also called a "hold harmless" clause.
INDEMNITY: The obligation resting on one party to make good any loss or damage another party has incurred or may incur by acting at his request for his benefit.
INSOLVENCY: The state of having liabilities that exceed assets, i.e. a negative net worth or equity.
INSTITUTIONAL LENDERS: Banks, savings and loan associations and other businesses which make loans to the public in the ordinary course of business.
INTEREST: Compensation for the use of money borrowed.
INTEREST RATE: A fee charged for the use of credit expressed as a percentage of the debt. It is calculated for a certain period of time, often over a year.
INTEREST RATE SWAP: Interest rate swaps are undertaken to reduce a borrower's exposure to adverse increases in interest rates. A swap is a contract that lets a borrower exchange a floating rate for a fixed interest rate. The contract typically is with a financial institution such as a bank. By engaging in swaps, NAMB converts the floating interest rate on its borrowings into an interest rate that is fixed for a three, five or seven year term to match the adjustment periods on the church loans.
INTRODUCTORY RATE: A low initial interest rate charged on credit that eventually rises once the specified introductory period is over. It is offered to attract new customers.
ITEMIZED DEDUCTION: Specific deductions allowed by the IRS outlined in the tax return.



LIABILITY: Legal responsibility or obligation to something. Consumers who are in debt are liable for repayment.
LAPSE: A term used to refer to a cancellation of a contract due to an individual's failure to pay premium.
LEASE: A written agreement between a property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.
LEVERAGE RATIOS: Ratios that show the per capita giving and debt loads for a church. These ratios are based on the current, average worship attendance.
LETTER OF CREDIT (L/C): A binding document that a buyer can request from his bank in order to guarantee that the payment for goods will be transferred to the seller. Basically, a letter of credit gives the seller reassurance that he will receive the payment for the goods. In order for the payment to occur, the seller has to present the bank with the necessary shipping documents confirming the delivery of goods within a given time frame. It is often used in international trade to eliminate risks such as unfamiliarity with the foreign country, customs, or political instability.
LIABILITIES, CURRENT: Those pecuniary obligations ordinarily intended to be paid in the usual course of business within a relatively short time, normally within a year, out of earnings.
LIABILITIES, LONG TERM: Those debts or pecuniary obligations intended at their inception to be paid at a future date, usually more than one year.
LIABILITY INSURANCE: Insurance that protects property owners against claims that alleges negligence or inappropriate action that resulted in bodily injury or property damage to another party.
LIEN: An interest in real or personal property which secures a debt; the lien may be voluntary, such as a mortgage in real property, or involuntary, such as a judgment lien or tax lien.
LINE OF CREDIT: A fixed amount of credit granted to cover a series of transactions.
LOAN: A business transaction between two legal entities whereby one party, known as a lender, agrees to loan funds to the second party, known as the borrower.
LOAN AGREEMENT: A document to accompany the note and security instrument which sets forth the terms of the transaction.
LOAN PARTICIPATION: A cash purchase of a percentage of an outstanding loan from the originating lender, usually with risk shared pro rata.
LOAN SERVICING: A service performed by a lender to protect a mortgage investment, including collecting monthly payments from borrowers.
LOAN-TO-VALUE RATIO: The loan amount divided by the lower of the appraisal value or the selling price of the security property.
LUMP SUM DEBT NEGOTIATION: A process aimed at getting creditors to agree to a "lump sum" pay off for a reduced amount in full settlement of a debt.



MARKET SURVEY: A survey of a subject market area to identify neighborhood characteristics in terms of demographics, residential and commercial developments, transportation and competition.
MARKET VALUE: The price which the property will bring in a competitive market under all conditions requisite to a fair sale, which would result from negotiations between a buyer and a seller, each acting prudently with knowledge and without undue stimulus.
MATURITY: Termination period of a note. For example: A 30 year mortgage has maturity of 30 years.
MEANS TEST: Added to the Code in 2005, the means test is intended to screen out those filing Chapter 7 who are supposedly able to repay some part of their debts. The test is found in Official Form B22a. Debtors who fail the means test may convert their case to another chapter of bankruptcy.
MEETING OF CREDITORS: The debtor must appear at a meeting with the trustee to be examined under oath about assets and liabilities. Creditors are invited but seldom attend. The meeting is sometimes called the 341 meeting, after the section of the Bankruptcy Code that requires it.
MINIMUM PAYMENT: The smallest amount of money that one may pay on a debt in order to keep the account from going into default. Often it encompasses only the interest on a debt, so it may be impossible to pay off some debts by making only such payments.
MONEY MANAGEMENT: The process of budgeting, saving, investing, spending or otherwise in overseeing the cash usage of an individual or group. The predominant use of the phrase in financial markets is that of an investment professional making investment decisions for large pools of funds, such as mutual funds or pension plans.
MONEY MARKET: Market for short-term debt securities, such as banker's acceptances, commercial paper, repos, negotiable certificates of deposit, and Treasury Bills with a maturity of one year or less and often 30 days or less. Money market securities are generally very safe investments which return a relatively low interest rate that is most appropriate for temporary cash storage or short-term time horizons. Bid and ask spreads are relatively small due to the large size and high liquidity of the market.
MORTGAGE: A loan to finance the purchase of real estate, usually with specified payment periods and interest rates. The borrower (mortgagor) gives the lender (mortgagee) a lien on the property as collateral for the loan.



NAMED INSURED: Any person(s), firms or corporation that is named to be protected under the insurance contract.
NEGATIVE AMORTIZATION: The situation in which partial payments are made on in debt, but instead of lowering the debt gradually, it increases the debt gradually. This can occur if payments made do not cover the interest, which then is added to the balance over time.
NEGOTIATED SETTLEMENT: Alternative term for out of court settlement.
NET WORTH: The excess of assets over creditor claims against the assets, that is to say, assets minus liabilities equals net worth.
NEW BANKRUPTCY LAWS: The major intent of bankruptcy reform is to require people, who can afford to make some payments towards their debt, to make these payments, while still affording them the right to have the rest of their debt erased. These people must file Chapter 13.
NON-DISCHARGEABLE: A debt that cannot be eliminated in bankruptcy. Non dischargeable debts remain legally enforceable despite the bankruptcy discharge. The Code's list of non dischargeable debts is found at 11 U.S.C. 523. The scope of the discharge in Chapter 13 differs from the discharge in Chapter 7.
NON-RENEWAL: Termination of insurance coverage at its expiration date.
NOTE: A legal document which evidences one's promise to pay another. For example, a borrower's promise to pay a lender.
NOTICE OF CANCELLATION: A notice written by an insurance agent with the intent of terminating a policy.



OVER-LIMIT FEE: A fee that is charged to credit borrowers who expand their balances past the allowable credit limits.



PAR: Used in connection with negotiable instruments to denote the face amount of the instrument and not the actual value it would receive on the open market.
PAYDAY LOAN: A loan that is granted to borrowers when a small amount of money is needed to cover funds until they receive their next paychecks. Once the paycheck is received, the cash advance loan must be repaid, often at a very high interest rate. Also known as a Cash Advance Loan.
PECUNIARY: Relates to money and monetary affairs or that which can be valued in money.
PERFECTION: When a secured creditor has taken the required steps to perfect his lien, the lien is senior to any liens that arise after perfection. A mortgage is perfected by recording it with the county recorder; a lien in personal property is perfected by filing a financing statement with the secretary of state. An unperfected lien is valid between the debtor and the secured creditor, but may be behind liens created later in time, but perfected earlier than the lien in question. An unperfected lien can be avoided by the trustee.
PERFORMANCE BOND: A surety bond supplied by one party to another protecting that party against loss in the event of improper performance or completion of the terms of an existing contract.
PERMANENT FINANCING: A fully amortized, or long term loan with payments which include both interest and principal and results in the elimination of the initial debt at its maturity.
PERSONAL PROPERTY: Assets, such as cars, stock, furniture, etc., that is not real estate or affixed to real property.
PETITION: The document that initiates a bankruptcy case. The filing of the petition constitutes an order for relief and institutes the automatic stay. Events are frequently described as "prepetition", happening before the bankruptcy petition was filed, and "post petition", after the bankruptcy was initiated.
POINT-OF-SALE: The literal place and time at which a transaction or agreement takes place.
POWER OF ATTORNEY: A written instrument by which one person as principal appoints another as his agent and confers upon him the authority to perform certain specified acts on behalf of the principal.
PREDATORY LENDING: Practice where a debt service allows you to get so much deep into debt that you are unable to find another debt service to help you get out of debt.
PREFERENCE: A transfer to a creditor in payment of an existing debt made within certain time periods before the commencement of the case. Preferences may be recovered by the trustee for the benefit of all creditors of the estate.
PRE-PETITION: Claims or events arising before the commencement of the bankruptcy case, that is, before the filing of the bankruptcy petition. Generally only pre petition debts may be discharged in a bankruptcy proceeding.
PRIME RATE: The prime rate of interest is a rate of interest that serves as a benchmark for most other loans in a country. The precise definition of prime rate differs from country to country. In the United States, the prime rate is the interest rate banks charge to large corporations for short-term loans.
PRIORITY: The Bankruptcy Code establishes the order in which claims are paid from the bankruptcy estate. All claims in a higher priority must be paid in full before claims with a lower priority receive anything. All claims with the same priority share pro rata. Claims are paid in this order - 1) costs of administration 2) priority claims and 3) general unsecured claims. Secured claims are paid from the proceeds of liquidating the collateral which secured the claim.
PRIORITY CLAIMS: Certain debts, such as unpaid wages, spousal or child support, and taxes are elevated in the payment hierarchy under the Code. Priority claims must be paid in full before general unsecured claims are paid.Priorities listed.
PRINCIPAL: The amount of an original debt that has not yet been paid. It does not include interest, but rather is the balance on which interest is based.
PROMISSORY NOTE: An unconditional promise in writing made by one person to another signed by the maker promising to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer.
PROOF OF CLAIM: The form filed with the court establishing the creditor's claim against the debtor.
PROPERTY OF THE ESTATE:The property that is not exempt and belongs to the bankruptcy estate. Property of the estate is usually sold by the trustee and the claims of creditors paid from the proceeds.



QUITCLAIM DEED: A conveyance to the grantee of only the interest held by the grantor at the time of the conveyance with no warranty as to encumbrances or condition of title.



REAFFIRM: The debtor can chose to waive the discharge as to a debt that is reaffirmed. Generally, the parties to the reaffirmed debt have the same rights and liabilities that each had prior to the bankruptcy filing - the debtor is obligated to pay and the creditor can sue or repossess if the debtor doesn't pay.
RE-AGE: The status of an account (current, delinquent, etc.) is updated to reflect the present situation.
REFINANCE: Paying off an existing loan with the proceeds from a new loan, usually of the same size, and using the same property as collateral.
REDEMPTION: The repayment of an indebtedness whether on maturity or prior to maturity.
RELIEF FROM STAY: A creditor can ask the judge to lift the automatic stay and permit some action against the debtor or the property of the estate. If the motion is granted, the moving party (but no one else) is free to take whatever action the court permits. Relief can be absolute, for example, permitting the creditor to foreclose on property, or limited, as for example, allowing the recordation of a notice of default.
RESCISSION: The canceling or annulling of an agreement, contract or deed.
REPOSSESSION: The taking back of property by a lender or seller from the borrower or buyer, usually due to default.
REVOLVING LINE OF CREDIT: A loan agreement in which a certain amount of money is able to be borrowed. As long as the loan is repaid, the borrower may obtain more money up to the limit of the agreement without having to apply for a new loan. Home equity lines of credit and credit cards utilize this method.



SCHEDULES: The debtor must file the required lists of assets and liabilities to commence a bankruptcy case, collectively called the schedules.
SECURED DEBT: A claim secured by a lien in the debtor's property by reason of the debtor's agreement or an involuntary lien such as a judgment or tax lien. The creditor's claim may be divided into a secured claim, to the extent of the value of the collateral, and an unsecured claim equal to the remainder of the total debt. Generally a secured claim must be perfected under applicable state law to be treated as a secured claim in the bankruptcy.
SECURED LOAN: A loan that is backed by collateral.
SECURITY INTEREST: Any interest in property which secures payment or performance of an obligation, frequently called a "lien" in real estate transactions.
SUBORDINATION AGREEMENT: An agreement in which a party holding a security interest in property grants another interested party a priority claim or preference to the property of the borrower ahead of any claim that the first interested party may have.



TASC: The Association of Settlement Companies - TASC's goals are to promote good practice in the debt settlement industry, protect the interests of consumer debtors, and lobby on behalf of debt settlement companies on the federal and state level.
TRANSUNION: TransUnion (Trans Union, LLC) is a consumer credit reporting agency, considered one of the three largest in the United States, which offers credit-related information to potential creditors. Like its main competitors, Equifax and Experian, TransUnion now markets credit reports directly to consumers.
TRUSTEE: The court appoints a trustee in every Chapter 7 and Chapter 13 case to review the debtor's schedules and represent the interests of the creditors in the bankruptcy case. The role of the trustee is different under the different chapters.



UNSECURED DEBT: A debt that is not secured against property. In the event that an account goes into default, there is no property that automatically can be taken in order to cover the lender's costs. Credit cards are common examples.
UNSECURED LOAN: A loan requiring no physical or "real" collateral.
USURY: Accepting more than the legal rate of interest in the applicable jurisdiction.



WRAPAROUND: An old loan is combined with a new loan, which results in an interest rate somewhere between the individual interest rates.



YIELD: The rate of return received from one's investment.