A Charging Order is a method creditors can use to enforce a Court Judgment or at least apply some pressure as it makes a secured debt out of an unsecured one.
A Count Court Judgment sets out the terms by which a debt is to be paid, usually by a specific date or by instalments. A creditor might look to a charging order if further payments are missed.
What is a Charging Order?
A charging order secures an unsecured debt against your property or other assets by placing a ‘charge’ on the property or land
Court Form N86: Interim Charging Order (CPR Part 73) gives some insight into the process.
The order will not usually get a creditor their money immediately; what it means is that when the property/asset gets sold, the charge is paid to the creditor before any of the proceeds of the sale passes on to the seller.
If you have other assets of value, the Court can put a charge on these instead. For loans secured on the property before the order is registered, for example, a mortgage, then the original loan/mortgage will be repaid first upon the sale.
A charging order does not force the sale of a property. However, if you do not keep up with payments, the creditor may ask the Court to issue an Order of Sale. Orders for sale of property are rarely used, with only a few hundred cases a year, as opposed to the thousands of charging orders, warrants and bankruptcy petitions that are issued by the courts.
A creditor must first have a CCJ awarded to be able to apply for a charging order and may do so even if you have kept to the terms of the CCJ.
Interim and final charging orders
The Court will initially issue an interim charging order, which sets a date for a hearing at least 21 days later. There a decision is made to issue a final charging order or discharge the interim order.
Possible defences against the order being made final will vary, depending on:
- your circumstances,
- having other debts,
- having equity in your house, how much or not at all,
- whether you own your home in joint names or solely,
- you can argue that a charging order would give the creditor an unfair preference over other unsecured creditors.
Once the order is made final, it can only be removed by paying the debt or selling the property or asset.
Divorce or separation
If you are currently involved in divorce proceedings, or a dispute over dividing up your former marital home, you must get legal advice from a solicitor. You may be able to stop the order being made, depending upon the stage in the divorce proceedings.
How Debt Guardians Can Help
Before the charging order
We’d look at your financial situation, and produce what’s called a common financial statement. This document will be a fair reflection of your income and essential expenditure and your ability to repay this and other debts.
Any money you have over necessary spending is called disposable income, and only this needs to go towards unsecured debt repayments. This means you’re treating each creditor equally and not just paying the ones acting most aggressively.
Once we’ve agreed upon a realistic amount you can afford each month, we may recommend applying for an IVA. We’d contact the creditor taking the legal action (and the Court if necessary). We’ll explain you are now taking steps to make reasonable offers to repay your debts. How early we can act is critical.
If the charging order is prevented or set aside, this debt will remain unsecured is includable in the IVA.
Order already issued
If it is not possible to stop a charging order or if one is already in place before you contact us. We can still help.
Again your disposable income is calculated, but this time, prioritising this the debt as an expenditure item. Debts with a charging order are not includable as part of an IVA as a creditor.