Glossary of debt terms

Glossary

Consumer credit agreements

Legislation: Consumer Credit Act 1995 and European Communities (Consumer Credit Agreements) Regulations 2010 (SI 281/2010).

The rules apply to almost all credit agreements, hire-purchase agreements and consumer-hire agreements to which a consumer is a party. (They do not apply to agreements entered into by businesses.) So, they apply to agreements to borrow money which you make with banks, building societies, moneylenders and certain other finance companies. They do not apply to agreements to borrow money from credit unions, pawnbrokers and utility service providers.

Agreements covered by the consumer credit legislation must be in writing. If they are not in writing, they are not enforceable. That means that the creditor would not succeed in an action for judgment against you in respect of the debts. The legislation provides that it is an offence for a creditor to demand payment if the agreement is not enforceable.

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

Contracts

In this context, a contract is an agreement by one party to provide goods or services for another in return for payment.

In general, contracts do not have to be in writing in order to be enforceable. However, contracts for the sale of land and contracts governed by the Consumer Credit Act must be in writing in order to be enforceable.

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

Court judgments

In this context, a Court judgment states that you owe a debt. That judgment can then be enforced in various ways.

Creditor

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

Debt forbearance and forgiveness

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

Debt forgiveness or cancellation occurs when your creditor decides not to pursue the debt. Permanent debt forgiveness is rare. Some creditors may cease to pursue the debt because they recognise that you will never be able to repay it but that does not mean that the debt is forgiven or cancelled. If your circumstances change, you may still be pursued for it.

Debt management agencies

There are a number of private commercial debt management agencies which help you to manage your debts for a fee. They are not regulated. MABS is a non-commercial body and does not charge fees.

Debtor

You are a debtor if you owe money to someone. If a court judgment is awarded against you, you are the 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 pay it back or you enter into an agreement to buy equipment by instalments and you fail to pay. It is a breach of contract to fail to pay such debts; it is not generally a criminal offence.

It is a criminal offence to fail to pay certain debts. For example, it is an offence not to pay your taxes, second home (NPPR) charge, Household Charge or TV licence fee. You may be charged 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 the normal way.

Priority debts

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

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

Secured loan

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

In general, debts such as bank loans and credit card debt are not secured. However, if you decide to roll up such loans into your mortgage, they now become secured loans.

If the property or goods on which the security is based are subsequently sold, the loan must be paid off before the proceeds can be used for any other purposes.

Simple contract debt

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

A range of legislation provides that various fees and levies which have not been paid may be dealt with in court in the same way as simple contract debts.

Time limits/Statute of Limitations

There are time limits (limitation periods) for taking most types of court action. These time limits are set either in the Statute of Limitations 1957, as amended, or in specific legislation dealing with the court issue involved. For example, the time limit for taking a range of personal injuries actions is generally two year but may be extended in certain circumstances (Civil Liability and Courts Act 2004) and it is one year for defamation (Defamation Act 2009). In general, the limitation periods can be postponed because of infancy and disability.

The law in relation to time limits is complex but, in general, the time limit for taking actions for breach of contract (for example, failure to pay for goods or services provided), for debt judgments and for non payment of charges such as rent is six years. This means that if your creditor does not start the court action within six years of the debt being due, the action is “statute-barred”. Effectively, that means that you cannot be forced to pay the debt.

If your creditor gets a judgment, then, in general, they have 12 years in which to enforce that judgment.

The general rules do not apply to taxes. There is a four year time limit on the Revenue Commissioners seeking tax from you and there is a four year time limit on you seeking repayment of taxes which you were not due to pay. However, if there is any fraud or neglect, there is no time limit.