A charging order is a means of securing an unpaid debt secured against your home or, in other words, turning an unsecured debt into a secured debt.
This means that if you sell or remortgage your home before the debt has been repaid, any proceeds made, including interest and costs, will go towards paying off the debt.
Having a charging order on your property can be daunting and the legal language used can make it sound more complicated than it is.
However, charging orders are usually only considered as a last resort after alternative methods of debt recovery have been unsuccessful.
What is the process of getting a charging order?
The process of getting a charging order typically involves the following steps:
Receiving a County Court Judgment (CCJ)
The first stage of the charging order process is receiving a County Court Judgment or other court order for an unpaid debt.
County Court Judgments are a type of court order that your creditor may take out against you to force you to repay an unpaid debt straightaway or in regular instalments.
This is a requirement before an application can be made for a charging order, meaning you must have already been given an opportunity to repay what you owe through a court order before a charging order is enforced.
Applying for an interim charging order
Once a CCJ has been obtained, your creditor can apply for an interim charging order. This is a temporary charging order that will place a charge on your property or share of the property (also known as your beneficial interest), preventing you from selling or remortgaging your home without the permission of your creditor.
An interim charging order can be obtained by a court officer without a court hearing, but a court hearing may be required to determine if the charging order is appropriate given your financial circumstances.
This will usually take place with a district judge and any joint owners of the property, such as a spouse or civil partner, should be given the chance to tell the judge how a charging order will affect them.
When you receive an interim charging order, you will have 14 days to object and must provide a legal reason for why a charge shouldn’t have been imposed.
Obtaining a final charging order
Once you have been given served with an interim charging order, you have 28 days to object to a final charging order by writing to the court and creditor.
However, if you don’t dispute the interim charging order within this timeframe or the court is satisfied that it would be appropriate, a final charging order may be granted.
This will place a charge on your property and give your creditor the right to seize money if you decide to sell or remortgage your home down the line.
Under the Charging Orders Act 1979, the court must consider all the circumstances of the case before issuing a final charging order, including your personal circumstances and whether any creditor would be unduly prejudiced or unfairly disadvantaged.
Order for sale
If you fail to make payments on the debt and your property is already subject to a charging order, the creditor may apply for an order of sale.
This gives your creditor the power to force the sale of your property to recover the money owed.
Understandably, this method is usually only granted in exceptional circumstances, such as when a debtor hasn’t made an effort to repay a large debt.
However, before an order for sale can be enforced, you must have been given proper notice of a charging order and had an opportunity to dispute the claim.
A massive thank you
“I’d like to say a massive thank you to Carrington Dean for helping me. It feels like I have control of my life again.”
How long does a charging order last?
In England and Wales, charging orders don’t expire.
When a charging order is placed on your property, it will be recorded on the Land Registry until the total amount owed including statutory interest has been repaid, either by selling your home or by other means. Once the debt has been repaid, you can apply to the Land Registry to have the charging order removed.
In Scotland, charging orders expire after 12 years.
What if I object to a final charging order?
If you object to a final charging order, you must send your objections to both the creditor and the court in the form of a written letter containing your argument against why a final order should be made against you. Remember to include a copy of your budget alongside the letter to ensure the court is aware of your current financial situation.
There will then be a hearing at your local County Court, where a judge will make a decision on whether to impose a final charging order.
Failure to let your objections known or attend this hearing may lead to a final charging order being enforced without your concerns being heard.
When an application is filed to discharge or vary a charging order at the County Court Money Claims Centre (CCMCM), the hearing must be transferred to the judgment debtor’s home court.
Can you stop a final charging order?
There are some instances where it may be more difficult for creditors to lodge a final charging order, such as:
If you are up to date with your CCJ payments
For CCJs made after 1 October 2012, the judge will review your payment history. If you have any missed payments, they’re more likely to issue a final charging order against you.
However, being up to date with your CCJ payments can prevent a final charging order from being lodged against you because your creditor is already receiving the money they are owed.
When you’re issued with a CCJ, its important to keep up with your payments to protect yourself from further legal action.
If you have little to no equity in your home
Equity is the amount of money you’d make after you sold your home and paid off your mortgage.
However, if there’s likely to be little or no equity in the property, your creditor is unlikely to recover the money owed by imposing a charging order and will usually resort to pursuing the debt through other means.
If it will affect those living with you
The judge must consider how selling your home would potentially affect other people living with you, including young, elderly, or disabled people.
If you can argue that they would be severely affected, a final charging order may be stopped.
For example, if the debt is in your name but you own the property jointly with someone else, you can argue that it’s unfair on the joint owner for the property to be sold.
If your other creditors haven’t enforced a charging order
If you have other creditors and they have agreed to let you repay your debt in regular instalments, you may be able to argue that a charging order is unnecessary.
This may be a worthwhile argument if you owe your other creditors more money and they still don’t believe a charging order is the right option to recover the amount owed.
Can interest be added to debt included in a charging order?
There are some rules surrounding how much interest can be added to a debt included in a charging order.
For example, debts not covered by the Consumer Credit Act are known as unregulated agreements.
If a CCJ then a charging order is issued for an unregulated agreement, the creditor can continue adding statutory interest at a flat rate of 8% per annum from the date an interim charging order is made as long as value of the CCJ was greater than £5,000.
This can be beneficial if the original debt was subject to a higher interest rate.
