How Charging Order Secures Your Debt Against Your Home?

A charging order secures your debt from your creditor against your home or assets. This means selling your home or considering remortgage prior to paying off your debt, the profits will compensate the charging order.

Furthermore, your creditor can only secure a charging order in the presence of CCJs or County Court Judgment. Through a charging order, your unsecured debt will become secured debt.

If you receive a charging order, this does not entail direct repossession or losing your home straight away. Besides, this only applies to people living in England and Wales. A similar process is in place under Scottish Courts and Northern Irish Courts.

When Can A Charging Order Occur?

The time when a creditor can get a charging order to secure debts depends on the time they got the CCJ against you.

CCJs received on or after 1 October 2012

In this case, your creditor can secure a charging order regardless of whether the CCJ payments ordered by the court are up to date.

CCJs received before 1 October 2012

For CCJs received before the 1st of October 2012, creditors can apply for charging order under these conditions:

  • missing installment payments ordered by the court in place of your CCJ
  • you are ordered to pay the entire amount yet you failed to do so

In contrast, if you remain compliant with the judgment, your creditor cannot secure a charging order. In case you can’t afford the judgment to pay the full amount, you can request the court to consider paying it through regular installments. You can also refer to court claims and process for more information. Also, check on the court forms, should you need to find out more about it.

Creditors Applying for a Charging Order

There are two stages in a charging order. These will be explained in detail below:

Interim Charging Orders

  • When your creditor decides to secure a charging order, a form has to be sent to the court with evidence from the Land Registry. This is to confirm ownership.
  • Once the court determines your right and ownership f the property may it be joint or solely owned, you’ll get an interim charging order through an N86 form along with a copy of the N379 form (creditors form, showing the reason for application). The same form will be sent to the joint owner of the property, mortgage provider, or other secured creditors.
  • A restriction will be issued on the Land Registry, which prohibits you from selling your home until the final charging order. In this manner, you’ll get a B136 from confirming the process. This form does not need any response.

An interim charging order is done without any court hearings. Thus, you need to write to your creditor and the court within 21 days of the receipt. In this case, the court may have a hearing place for the decision.

Your reasons to appeal might be due to:

  1. you do not own the property, and is not entitled for any portion of the equity
  2. the CCJ occurred before the 1st of October 2012, and you’re able to comply with the judgment ordered by the court
  3. the creditor was unable to comply with the required process when applying for the charging order

You may also request the court to consider conditions on the charging order. This condition might include affordable installments when you think you can’t afford payments. Once the court grants your request, you must keep your payments up to date to prevent further enforcement actions to occur.

If the installment order is not in place, there’s a great risk that your creditor will consider further enforcement action such as using bailiffs to recover the debt.

Final Charging Order

For the following stage of the charging order method, if you’ve not obtained any drafted disputes, a court officer or a District Judge will determine for a final charging order.

If you addressed your appeal to the court and creditor, or if you petitioned other conditions, the court may regulate a hearing to determine for a final charging order. The hearing will be held at your local County Court hearing centre. Usually, it’s in private chambers with a District Judge and frequently a delegate from the creditor.

The judge will hear both parties and determine to finalize the order or not. This includes the conditions if any are to be implemented. Once a final charging order is concluded, you’ll get a confirmation letter from the court (N87 form).

Home Owned Jointly and Charging Orders

If your home is jointly owned and your creditor wishes t secure a charging order, the other person will have to be notified about it.

Couples mostly own their house as joint tenants. This can mean that if one passed away, the estate is given as sole owner of the living partner. A charging order modifies a joint tenancy toward a tenancy in common. This indicates the percentage of the property held by the person who departed will constitute a portion of their property and would not be instantly transferred to the other person.

Other Types Of Charging Order

Other cases where charging order is utilized:

  • Legal aid

If you take legal aid relief in responding to a court case, the Legal Aid Agency can impose a charging order against your home. This obtains the legal aid relief you were supplied when you remortgage or sell your home. This process is referred to as a statutory charge.

If you declare bankruptcy and you possess equity, your home will usually be traded. But if you only have limited equity, the official receiver will prefer to get a charging order. This indicates if you sell or remortgage your home following your bankruptcy, any of your equity will be given to the official receiver

Interest On Charging Orders

If a creditor takes court action for a debt which is regulated by the Consumer Credit Act, interest stops at the point the CCJ is issued. This includes overdrafts, personal loans, payday loans, store cards, credit cards and similar debts. In very rare cases, interest can continue on a debt after a CCJ if the original contract allowed this.

Order For Sale

If you receive a charging order, you must keep your payments up to date. If failed to comply, the creditor could petition to the court for an order for sale. This would require you to sell your home so your creditor can recover the debt.

For CCJs received on or after the 1st of October 2012, the creditor is not entitled to demand for an order for sale once the court ordered you to repay the debt through installments and these are on time.

If a creditor petitioned for an order for sale, another hearing will transpire, giving you the chance to relay your circumstances to a judge. The order for sale will only be conferred as an ultimate option.