A charging order is a court order that seeks to compel you to settle unpaid debt, by securing the outstanding debt against your home or another property you own.
In this post we’ll examine what a charging order is, what the charging order process involves and, most importantly, how to remove a charging order that’s been taken out on a property you own.
What is a charging order?
A charging order is a court order that creditors can apply for if you refuse to repay your debts. The purpose of a charging order is to tie the unpaid debt to your home, forcing you to repay the money owed rather than be ordered to sell your home.
Charging orders can only be applied for if your creditor has already applied for a County Court Judgment (CCJ). County Court Judgments are court orders that set out a timeline by which you need to repay your debt to creditors.
If you receive a CCJ and continue to miss repayments, creditors might apply for a charging order as a way to force your hand.
The charging order will secure the debt against your home by placing a charge on the ‘beneficial interest’ you have on the property – in other words, your creditors will be able to recover their money by deducting it from the funds you raise in selling your property.
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What does the charging order process involve?
If you’re in the early stages of a dispute with creditors, you won’t receive a charging order right away. There’s a three-step process creditors have to go through first, starting with applying for a County Court Judgment.
County Court Judgment
The first step for creditors looking to attach a charging order to your property is to apply for a CCJ, a court order that demonstrates that the court agrees with your creditors that the debt should be repaid.
You will be given a CCJ by a court officer. The court order will lay out the timeframe by which you should repay your debts. Creditors can only apply for a charging order if the same creditor applied for a CCJ previously, and you continued to miss payments after receiving it.
Interim charging order
If your creditor applies for a charging order, the court will initially issue what’s known as an interim charging order.
Interim charging orders are essentially placeholders until your court hearing takes place. When you receive your interim order, a court hearing date will be set. At the hearing you will be given a chance to present your case, and a decision will be made on whether to issue a final charging order.
Final charging order
A final charging order confirms that you will either have to repay the debt under dispute, or be forced to sell your home.
Once you receive a final order, the order will be registered with the Land Registry and a ‘charge’ will be placed against any property. This means when you come to sell your home, the charge will be paid to your creditor before you receive any of the proceeds. In certain cases, you may also need to pay money towards your creditor’s court costs.
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Can you dispute a charging order?
Although your options are limited once a final charging order has been issued, there are certain circumstances where you may be able to make an argument against an interim charging order at your court hearing:
- You’re joint owners of a property: If the charging order is tied to a property that’s jointly owned, but the debt is in your name only, the court can only place an order on the portion of the property you own.
- You have payment plans in place with other unsecured creditors: If you owe money to multiple creditors and have payment plans in place, you might argue that the charging order will impact your ability to honour existing arrangements.
- You’re at risk of going bankrupt: If you’re likely to be made bankrupt in the near future, there’s a case to be made that a charging order would unfairly advantage one creditor over all other unsecured creditors.
How to remove a charging order from a property
If you have received a final charging order against your home, you only have two options:
- Pay the charging order
- Sell your home (and allow the creditor to recover their money from the proceeds)
The only way to remove a final charging order from a property and keep your home is to pay it. You will be expected to pay your debt in full, as well as any court fees and additional costs – like statutory interest if the debt in question isn’t regulated by the Consumer Credit Act.
Once you have paid your charging order, you can apply to the court for a certificate of satisfaction that demonstrates that you have been discharged from your charging order and the CCJ that preceded it.
What happens if I don’t pay a charging order?
Debt secured against your home is a huge concern, because failure to repay puts your home at risk.
A charging order effectively turns unsecured debt into secured debt, meaning there are severe consequences if you won’t pay or fail to respond to the order against you.
Order for sale
If you receive a final charging order and decide not to pay it, your creditors will kickstart the process of forcing you to sell your home by applying for an ‘order for sale’.
An order for sale is the court order your creditors can use to remove you from your property prior to a sale taking place. Once the order kicks in, you will have 28 days to repay your debt or leave your home. Failure to do so might force your creditor to apply for a warrant of possession, which will give you the date and time when you will be evicted by bailiffs.
Where can I get debt advice that will help me protect my property?
If you have debt you can’t afford to repay, you may be worried about the lengths your creditors will go to to recover their money, especially if they have threatened you with a charging order on your home.
Nobody should have to live under the threat of being evicted, and you don’t have to. At Your Debt Expert, our specialists can help you restructure your debt, come up with an affordable payment plan, and protect your property from creditors.
For confidential debt advice you can trust, talk to one of our friendly advisors today. Call us on 0800 082 8086.
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