When creditors have a court order like a County Court Judgment (CCJ) against you and the court decides you should repay the money they owe, creditors can apply for a second court order called a ‘charging order’ that secures the debt you owe against property you own.’
In this blog we’ll look into what a charging order is, the difference between an interim charging order and a final charging order, and whether having a charging order against you can cause you to lose your home.
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What is a charging order on your home?
Charging orders are court orders that are used to encourage you to repay unpaid debt. When a creditor successfully applies for a court order against you, they may be concerned that you will continue to avoid payment.
One way to compel you to repay your debts is to apply for a charging order on your home. A charging order takes your existing debt and secures it against your home or another property you own.
Failure to repay what you owe after receiving a charging order could drive your creditors to apply for an ‘Order for sale’, another order that can force you to sell your home.
When can creditors apply for a charging order?
County Court Judgment
The point of the charging order is to impose a charge over the debtor’s ‘beneficial interest’ in a property – in other words, by granting the charging order, the court has decided that you shouldn’t benefit from a financial share in a property when you refuse to repay your debts.
It’s possible for creditors to apply for a charging order as long as the same creditor applied previously for a County Court Judgement against you. Only once the creditor is approved for a CCJ, can they then reapply to the court for a charging order.
Thereafter, you will be expected to repay the county court money outlined in your CCJ, otherwise you may face more serious consequences, up to and including being forced to sell your home.
How do creditors get a charging order?
Any creditor applying for a charging order against you will need to go through a two-step process, applying for an ‘interim’ charging order, followed by a ‘final’ charging order.
Interim charging order
The main purpose of an interim charging order is to stop an individual facing a charging order from selling their home before the final charging order can be processed.
Once the interim order has been approved, you won’t be able to legally sell your home without using the proceeds to repay the relevant creditor in full.
An interim charging order is typically handed down by a court officer without the involvement of a judge. A judge will only get involved if you’ve kept up to date with an instalment order made before October 2012, or if there’s another valid reason a court officer thinks the application should be considered by a judge.
Once your creditors have applied for an interim order, they will register a charge on your property with HM Land Registry. If you eventually repay your debt in full, you can ask the Land Registry to remove the charge.
Final charging order
Once you receive your interim charging order, you will then have 28 days to object to a final order, the last part of the process which means that the debtor’s property will eventually have to be sold.
If you decide to object to the final order, you will first be asked to outline your objections in writing. These written objections will be considered by a court officer, after which there will be a hearing at your local county court with a judge present.
Once the hearing date is confirmed, you will be asked to attend the session, where the judge will look at the evidence you’ve sent, consider the creditor’s position, and make a ruling on whether or not to issue a final charging order.
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Can I lose my home through charging order debt?
If the judge issues a final charging order, unfortunately you will lose your home. A final order means you will be forced to sell your property and use the money raised to deal with your outstanding debts (as well as any relevant court fees or other court costs).
There are two ways your creditors can go about this: they can decide to wait until you sell the property on your own terms, or they can apply for an ‘order for sale’, another court order that will compel you to sell your home right away.
There are things you can do to protect yourself against charging orders, but once you receive a final order, you will be left with few options. As soon as the court passes the judgment, creditor pressure begins. That’s why it’s important that you seek debt advice well in advance of this.
How do I deal with a charging order against my home?
If you have received a charging order against your home and you want to protect the property, the best way to do this is to repay your creditor in full. This will include statutory interest on the debt if the debt in question was not regulated under the Consumer Credit Act.
Once the creditor is satisfied that any outstanding debt or missed payments have been taken care of, you can apply for a charging order to be ‘dismissed’, meaning the order against your home will no longer be active.
After your order is dismissed, you can request that the court send you a ‘certificate of satisfaction’, a document you can use as evidence that your County Court Judgment and the subsequent charging order against you have been discharged.
Will a charging order appear on my credit file?
No, the charging order on your property won’t appear on your credit file, however the CCJ that led to the charging order will be listed on your credit report.
CCJs remain on your credit report for a period of six years from the date they are first issued, even if you pay it off during this time. Having a CCJ on your file can make it more difficult for you to apply for new lines of credit.
After six years, any evidence of your CCJ will be wiped from your credit record.
When does a charging order expire?
According to the Solicitors Regulation Authority, a charging order doesn’t expire if you are a resident of England and Wales.
The order will remain on the Land Registry until the debt has been paid in full. Only once you have repaid what you owe, can you apply to HM Land Registry to have it removed from your record.
If you are a resident in Scotland, on the other hand, a charging order will eventually expire after a period of 12 years.
Where can I get debt advice on CCJs and charging orders?
When you let your unsecured debt pile up without responding, creditors might decide to take matters into their own hands, including applying for County Court Judgments and charging orders against you.
Dealing with debt is difficult, but it’s important that you take action as soon as possible. That’s where we can help. At Your Debt Expert, our team specialises in debt solutions that take your personal circumstances into account.
For more information on how you can deal with your debt and protect your property from creditors, talk to one of our friendly advisers today; just phone 0800 082 8086.
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