What is a charging order on a property
Everything you need to know about Charging Orders and what to do if you get one.
If someone takes you to court for an unpaid debt and the court accepts the money is owed, you’ll be issued a County Court Judgement (most people know this as a ‘CCJ’).
It can be a scary and confusing time. You may be unsure of what can happen after you’ve received the CCJ and what rights you have to fight your corner. The term Charging Order might appear in correspondence related to your debt, but what does it all mean?!
Don’t worry, we’re here to explain that, as well as under what circumstances a charging order can be granted and what options you have to prevent or manage the situation. Just good, clear information to help you navigate the legal jargon.
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What is a Charging Order and when can you get one?
If you have been given a CCJ due to an outstanding debt, the person or business you owe may be able to ask the court for a Charging Order to secure this debt against your home or any other property that you own.
A secured debt is a debt backed by collateral, meaning that if you default on the debt there is security (such as a property) in place that the creditor has the right to take to satisfy the debt. Other typical examples of secured debt are mortgages and car finance.
Simply put, your creditors are saying “you may not have the money to pay now but you have a property that is worth something - we will use it to guarantee we are eventually paid”.
Now, this doesn’t always happen. Far from it. Charging Orders are often a last resort when it comes to debt recovery. It usually depends on the size of the debt, your other options to pay it off and how aggressively your creditors are pursuing the debt.
If your debt does get to the point of a charging order being issued, it’s important you know what happens next and where you go from here. By knowing this, you can make a sensible, informed decision and take back some control of the situation.
It's now time to understand a little more about scenarios impacting Charging Orders …
Not all debts lead to a Charging Order
Firstly, not all debts will be granted a Charging Order to secure them. It depends on when your County Court Judgement (CCJ) was granted and if you have maintained your payments since the CCJ was issued.
The law regarding Charging Orders was changed in October 2012, meaning that whether you were issued a CCJ before or after October 2012 can make a big difference to your situation.
What you need to check are the three following things:
- The date your creditor applied for the CCJ
- The date it was granted and
- What it says about repayments
If your County Court Judgement (CCJ) was issued before 1st October 2012
The court is unlikely to grant a charging order request unless you’ve missed a deadline to pay your debt. Or, you have missed an instalment on an agreed repayment plan.
So, if it’s an old debt and you’ve been keeping up with the repayments there’s a good chance you’ll be okay.
If your County Court Judgement (CCJ) was issued on or after 1st October 2012
Your creditors can apply for a Charging Order once they have secured a CCJ, no matter how well your repayments have been going.
Don’t worry, you do still have options if that’s the case. Below we’ll take you through exactly what they are.
Your creditor has applied for a Charging Order, what happens next?
The Charging Order application has two key stages after the initial application:
Stage one: Your creditor gets an ‘Interim Order’ from the court.
Stage two: A decision is made on whether a ‘final charging order’ is issued.
What’s an Interim order?
Put simply, a mark is put against the property with the Land Registry which prevents you selling it before the Final Charging Order is decided on. To be more precise, it stops you selling it without telling your creditor.
A creditor can obtain this Interim Order without a hearing once they have been granted the CCJ, unless you have made all your agreed instalments on time, in which case the matter will be brought before a judge to decide (regardless of when the CCJ was issued).
Your creditor must send you a copy of the Interim Order within 21 days of it being made. Now it’s time for your move. You then have 28 days to object to the ‘Final Charging Order’ going ahead or at least seven days before the Final Charging Order hearing date if one was agreed when the judge granted the Interim Order.
I’ve received an Interim Order, what happens next?
First thing first, don’t ignore it. If you’ve received your copy of the Interim Order in the post and you object to it, you need to send your objection in writing to the court and also a copy to the creditor.
You should receive notification in response to your objection in the post, informing you of a hearing date that should take place at your local county court. The judge will decide whether or not to grant the Final Charging Order based on the information provided by both parties.
To give yourself the best chance of your objection succeeding, make sure you show up to court and put your case forward (or re-schedule if you can’t make it). Judges are much more likely to rule against you if you don’t even turn up! It can be easy to bury your head in the sand when you have this issue weighing on you, we’ve seen it happen all too often, but you’ve really got to get yourself there to fight your corner.
When you are in front of the judge explain any extenuating circumstances and let them know if you feel you can pay the debt off without the need for a Charging Order. Some honesty and a realistic plan of action often goes a long way. You can’t change what’s happened before now, but you can influence what happens in the future so give yourself the best chance you can!
What is a Final Charging Order?
If a judge grants a ‘Final Charging Order’, this means you will not be able to sell your property without clearing all monies owed to the creditor. The sale will not go through without this happening.
Can I do anything to stop a Final Charging Order being granted?
The only immediate action you can take to prevent the Final Charging Order being issued is to settle the debt. It sounds straight forward but the reality is you probably wouldn’t be reading this if you were able to do that.
Another possible option is to ask the judge if the Final Charging Order can be suspended with a commitment to agree a payment plan and make sure you follow it. Conditions like this may be granted but know if you break the agreement the Final Charging Order will likely be granted.
If all else fails
If the judge has decided to grant the Charging Order, to prevent any further action, you can ask the judge for a condition that prevents the creditor from trying to force you to sell your house immediately (Order for Sale).
For example: Ask the judge to insert a clause preventing the sale of your house whilst your children are still living there.
When putting your case forward, remember, the judge must decide that whatever your request is, it must be reasonable and fair to both parties, both you and the creditor.
Don't forget to read The Real Debt Guy's final thoughts below!
The information in this article is considered to be true and correct at the date of publication.