Glossary of Terms

What does it mean to be insolvent?

The simple rule of thumb is that if someone is unable to pay their debts as they fall due, then they are insolvent.


Annual review

A full reassessment of a client’s current financial circumstances on the anniversary of entering into an insolvency arrangement or on the anniversary of his/her last full review.


The agreement between the client and the insolvency firm based principally on the insolvency firm’s Terms of Business.



Bankruptcy is a formal method of dealing with debts you cannot pay if other options have failed or are not appropriate. Bankruptcy proceedings will free you from debt and make sure your assets are shared fairly among your creditors. The consequences of bankruptcy are severe and long-lasting. No one should make an application for bankruptcy without seeking advice.


Client authority form

A form signed by a client to give the insolvency firm authority to contact a client’s creditors and to act on a client’s behalf. Creditors do not always need to see these forms, but they must be on record in the event of a request for inspection by any creditor with whom the insolvency firm is dealing on a client’s behalf.


The person, bank or business that is owed money.

Credit rating

A credit rating that estimates the creditworthiness of an individual or corporation, made by credit bureaus based on a borrower’s overall credit history. Credit ratings are calculated from financial history and current assets and liabilities. A credit rating tells a lender or investor the probability of the borrower being able to pay back a loan.


Monthly or Annual management fee

A fee paid to an insolvency firm for managing a debtors affairs with his/her listed creditors, providing on-going debt advice, issuing statements and reports, processing correspondence received from creditors, dealing with new creditors or agencies when notified and generally acting in the client’s best interests throughout the duration of the insolvency arrangement.


Prescribed Financial Statement (PFS)

A detailed statement of a debtor’s current financial affairs, listing sources of income and items of expenditure, including secured and unsecured creditors. This is used to calculate what a debtor can reasonably afford to pay to his/her creditors every month.