Charging Orders

What is a charging order?

If a creditor has a County Court Judgment (CCJ) against you already, ordering you to repay a debt, if you do not keep to the repayments agreed under the CCJ,  they may be able to apply to the court for a charging order to enforce the judgment .

A charging order if agreed by the court gives the creditor security for the debt; in other words, turns previously unsecured debt into secured debt and therefore puts your home more at risk

How will you know about an application?

Although an interim Charging Order can be awarded by the court without a hearing it is not the final order, which cannot be made without a hearing and you should receive 21 days notice of such a hearing. However the creditor can register the interim order as a charge against your property to stop you selling it before a hearing has taken place.

The hearing is for the court to decide whether or not to make the charging order permanent ('Final').

If you object to a charging order being made final then you should send the creditor and the court written evidence stating why you object at least 7 days before the hearing.

Your objections should be sent by registered post to both the creditor and the court. If you do this then your arguments should be taken into account by the District Judge at the hearing. You should still go to the hearing.

If you cannot attend on that date, contact the court for a different hearing date to be arranged. If you do not go, the charging order is likely to be made final by the court at the request of the creditor.

How can you defend a case?

The court must consider whether it is reasonable to make a charging order. Under The Charging Orders Act 1979 the court has to consider all the circumstances of the case.

In particular the court needs to consider both your personal circumstances and whether any other creditors would be disadvantaged by the creditor who is applying for an order, being granted an order.

Arguments you can use against the order being made can include the following;-

 

• You have kept up with instalments on a county court judgment and therefore the court should not make a final charging order. If this is the case but you still had an interim charging order made against you, you MUST go to the hearing and take evidence that you have kept up with the instalments ordered. 
• If you are currently involved in divorce proceedings, or a dispute over dividing up the former matrimonial home, you may be able to stop a charging order being made, depending upon the stage in the divorce.
• You have a number of other debts and making a charging order in favour of one creditor would give them unfair priority over these other unsecured creditors. It is particularly useful if you can show you already have a payment arrangement in place with your other creditors.
• The creditor who is applying for the order could have initially given you a secured loan when you first took out the unsecured loan but chose not to? This could be particularly relevant, if you do have other unsecured creditors who may be disadvantaged.
• There are other ways the court could enforce payment of the debt. You could ask the court to make an instalment order so you make monthly payments you can afford, or an attachment of earnings order so that the instalments would come directly from your wages.
• If you owe less than £5,000 in total to all your creditors, you can argue that the debt should be included in an administration order. (Dom this should be a hyperlink to our existing page on administration orders)
• If your home is worth less than your mortgage then you can argue it is not worth a charging order being made as it still wouldn’t ensure the creditor applying would be paid.

What happens if you are unsuccessful and an order is made?

Don’t worry - It is rare for the court to allow a creditor who has a final charging order to sell your home and providing you offer to pay monthly instalments, most courts wouldn’t agree to such an enforcement.

Most creditors are prepared to wait for you to sell your home at some point in the future and to be paid out of the proceeds of the sale.

How can you clear a charging order?

If you pay off the amount you owe under the charging order, or move when due to the charge being registered your solicitor would pay it off from the sale proceeds, you can apply to the court for the order to be discharged. Ask the court for a certificate of satisfaction on your county court judgment and include evidence of payment.

 

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More information:
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