What is a charging order?
If a creditor has taken you to court over failure to repay a debt, then this may result in them having a county court judgment (CCJ) or another form of a court order against you. This will mean that you are required by the order of the court to repay the money that you own. This will either be made through regular payments, or you may be required to repay the entire debt by a certain date.
If your creditor has a court order against you, then they can apply for another court order that will secure the debt against your home or any other property that you own. This is known as a ‘charging order’. If you own a share in a property, then the charging order will only apply to your share of the property.
A charging order should be taken very seriously as you may lose your home if you don’t repay your debt. A creditor who has obtained a charging order against you can take this a step further and apply for the court to grant an ‘order of sale’, which will force you to sell your home.
If your creditor is seeking to take out a charging order or an order of sale against you, then you should speak with your local Citizens Advice.
When Can A Creditor Apply For A Charing Order?
A charging order can only be taken out against you if you have already received a county court judgment against you for the same debt. After the CCJ has been issued, then the creditor will need to apply to the court in order to obtain the charging order.
The rules surrounding when a creditor can apply for a charging order were changed in 2012. You will need to check the date that the creditor applied for the original CCJ when it was granted, and what conditions the CCJ sets out regarding repayments.
If your creditor got a CCJ taken out against you before 1st October 2012 then they can only apply for a charging order if you have missed the deadline for repaying the entire debt, or you are paying the debt back in instalments and you have missed a payment. In the instance that you have missed one or more payments, try and catch up on these before your hearing and you will avoid getting a charging order.
If your creditor got the CCJ on or after the 1st October 2012, then they are able to apply for their charging order straight away, even if you are currently up-to-date on all of your payments under the terms of the CCJ.
How Does A Creditor Obtain A Charging Order?
There are two stages in the application process that a creditor will need to go through to obtain a charging order. Firstly, they will need to get an ‘interim order’ and this will be followed by a ‘final order’.
The interim order is usually put in place to stop you from selling your property without your creditor knowing before the final order is granted.
If the court grants the final charging order and you sell your property, that means that you will have to pay your creditor back out of the proceeds of the sale.
A creditor obtaining a final charging order against you does not mean that you will have to sell your property. If your creditor wants you to sell your property, then they will need to obtain an order of sale from the court.
You can try to stop the court from granting either the final charging order or an order of sale by arguing your case in court. You could also seek to get the judge to add conditions to the final charging order which may make it harder for the creditor to force you to sell your property.
What Is An Interim Charging Order?
An interim charging order can be made by the court without the need for a hearing. There would only need to be a hearing with the judge if you are up to date with an instalment order that was set up prior to 1st October 2012 or the court officer believes there is a reason that there should be a judge involved in the hearings.
If the decision is made by an officer of the court, your creditor will need to send you the interim charing order within 21 days of it being made.
If the decision is made by a judge, they may or may not decide to make an interim charging order, or they may set a hearing date at your local county court so that a judge can consider whether to make the final charging order.
When applying for an interim charging order, the creditor will also register a charge on your property with the land registry which will prevent you from selling the property without them knowing about it.
This charge will be removed by the land registry if you can repay the debt in full at this stage.
What Is A Final Charging Order?
Once you have been served with an interim charging order, you will have 28 days in which to object to a final charging order. This objection must be made in writing to both the court and the creditor.
If you object to the order, there will be a hearing made at your local county court. A judge will make a decision about whether a final charging order will be granted.
If you don’t send an objection to the order, the judge will make the decision on the final charging order without the need for a hearing.
If you have a hearing, you should attend. If you cannot make it, inform the court and seek an alternative date. If you are absent from the hearing, then the court is more likely to decide to ke the order final.
The hearing is a chance to allow a judge to look at the evidence you provide showing why you don’t want a charging order to be made. They will listen to the arguments made by your creditor and make a decision after taking into account both sides.
How To Prevent A Charging Order Being Made?
In order to stop a charging order being made against you, you could employ several arguments. Examples of these include:
- You have not missed any instalments
- The property that you own has little or no equity
- The charging order is unfair on your other creditors
- The charging order is unfair towards people that you live with
- Other creditors that you owe money to are not seeking charging orders
What To Do If The Final Charging Order Is Made?
If the final charging order is granted, you may be able to apply for the order to be ‘set aside’, you could ask for conditions to be attached to the order, or seek to get the order changed.
Having the charging order set aside means that the debt will go back to the judgement stage and the creditor will need to reapply to the court before they can take further action. You will need to apply to the court to do this, however, by going through this process you may have enough time in which to repay your debt.
This can only be done if the court did not consider your circumstances fully.
You can seek to add conditions to the charging order. For example, you may ask that your property not be sold while your children are still at school, or the final order be suspended as long as you stick to a payment plan.
You could apply to get the charging order changed. This will be applicable if there are conditions attached to the order. You can apply to have these conditions changed. These may be associated with repayment agreements.