What is a charging order?

When you owe money to a creditor and they have a County Court Judgment (CCJ) against you, they can also apply for something called a charging order – a different kind of court order that secures the debt your have with that creditor against your home.

In this guide, we explore charging orders – what they are, how they work, how you get rid of a charging order, and where you can find the debt help you need to protect your home from creditors.

What is a charging order and how does a charging order work?

A charging order secures a debt you have with a creditor against your property in accordance with the Charging Orders Act 1979.

Creditors can apply for a charging order to be placed on your debts if they already have a County Court Judgment (CCJ) against you and is a way of turning an unsecured debt into a secured debt.

That means if you sell or remortgage the property before the debt is cleared, the charging order will be paid using the proceeds from the sale of your home.

Is having a charging order against your home serious?

A charging order is serious, and you could lose your home if you don’t pay back what you owe. Once the charging order has been obtained, creditors can also ask the court for another to force the sale of your home, this is known as an order for sale.

Applications for charging orders can be made in England and Wales, however, similar action can be taken in Scottish and Northern Irish courts.

If you’re worried about a charging order it is important to get as much advice and information as possible from debt industry experts to find out more about your rights.

When can a creditor apply for a charging order?

The charging order process begins with an application to the court. A creditor can only apply for a charging order if they have a CCJ against you.

The two don’t come hand in hand, however, so the creditor must ask the court to get a charging order after a CCJ has been granted. This means a creditor can make an application for a charging order even if payments are up to date.

There are strict rules about when a creditor can apply for a charging order and so if you find yourself subject to one it’s important to always check the following:

  • The date your creditor applied for
  • The original CCJ
  • The date the CCJ was granted
  • What the CCJ states about repayments

How does a creditor apply for a charging order?

There are two stages in the application process for a charging order. Your creditor needs to apply for an interim charging order, and then a final order.

Interim charging order

The interim charging order is typically granted by the court, without a hearing, to prevent the sale of a property before the final order has been approved.

In order to apply for an interim order, the creditor must provide the court with proof from the Land Registry that you are a homeowner or the co-owner of your home.

If this is approved, you will receive an interim charging order on form N86 as well as a copy of the creditor’s form N379 which highlights the reason for the application.

This will also be sent to any other person you jointly own the property with as well as your mortgage provider.

A restriction will then be placed on the Land Registry that will prevent the sale of your property or estate until the final charging order court hearing.

Can you make an interim charging order go away?

You do have the right to object to interim charging orders and must contact the court in writing within 21 days of receiving the interim order.

Objections can include:

  • The property is owned by another person and you aren’t entitled to any equity in it
  • The CCJ was in place prior to 1 October 2012 and all payments are up to date
  • The application process hasn’t been followed properly

While it may seem like your options are limited at this point, it’s important to be aware that you can ask the court for conditions to be set on the order. This can include an affordable instalment order in which you and the court agree on regular monthly payments.

This can make it harder for creditors to take further enforcement action.

Final charging order

If no objection is made to the interim order a court officer or District Judge will decide whether to grant a final charging order. This will be done at a private hearing during which both parties will have the opportunity to state their case.

If the final order is granted by the court, this means that any proceeds from the sale of your property in the future must be used to repay what you owe to the creditor.

It’s important to be aware that if your creditor is granted a final order, there is no requirement to sell your home straight away. In order to force the sale of your home, they must ask the court for a further order known as an order for sale.

Can you get rid of a final charging order?

The court must take your personal circumstances into consideration when deciding whether to grant the final charging order or not.

You may be able to make the case that the order shouldn’t be granted for one of the following reasons:

  • The proprietor (you) holds little or no equity in the home, meaning your creditor wouldn’t get their money back if it was sold.
  • If other creditors aren’t asking for charging orders and are accepting of a repayment plan – especially if you owe others more money.
  • You could also argue that the charging order is unfair on the other people you live with, for example, any dependents. Alternatively, if you own the property alongside another person, such as a partner, but the debt is only in your name you could argue it’s unfair on the other person.
  • If you owe money to several creditors you could argue that the charging order is unfair on the others – particularly if you’re likely to be made bankrupt as this would give the creditor an advantage over other unsecured creditors.

 

Are there any other options once a final charging order is approved?

There are options available should the district judge approve the final charging order, including asking for the order to be set aside or for conditions to be attached to it.

Applying for the charging order to be set aside

This means that the debt would be reverted to the judgment stage and your creditor would need to reapply for the court. This can give you more time to repay.

Having a charging order set aside by the court isn’t always an easy process and you can only do this if you believe your circumstances weren’t properly considered by the court. To apply for the order to be set aside, you should fill in a N244 court application form.

Attaching conditions to the charging order

You can petition the court to ask to stop the creditor from forcing you to sell your home immediately. There are several reasons you may be able to attach a condition to a charging order, including asking for your house not to be sold while your child or children are at school or as long as you keep to an agreed payment plan.

Changing a final charging order

If your charging order has conditions attached you can ask the court for these to be amended if your financial circumstances change in the future.

For example, if you have agreed on a repayment plan you can ask for the payment amount to be changed or for the date of the final instalment to be altered should it be required.

What is an order for sale?

When a creditor has been granted a final charging order they can apply for an order for sale.

You will still need to make payments towards the debt you owe in order to prevent the creditor from forcing the sale of your property.

An order for sale is only an option for debts over £1,000 and can’t be actioned against debt covered by the Consumer Credit Act.

Agreements such as personal loans and credit cards are typically covered by the Consumer Credit Act so it’s important to check the debt included in the order doesn’t fall under this.

Why would a creditor apply for an order of sale?

There are two situations you may find yourself in when it comes to a creditor applying for an order of sale.

Your creditor might hold off applying for the order of sale once the final charge order has been approved by the courts. This means they are happy for you to sell your home when you’re ready.

However, some creditors might apply for an order of sale straight away – regardless of the amount you owe. The decision is often based on how quickly the creditor wants to claim their money back.

Your creditor may also take other factors into consideration when applying for an order of sale. These can include:

  • If you can repay what you owe in a reasonable time using regular payments or a lump sum.
  • If other secured loans or mortgages will also receive funds from the sale
  • If there is a low level of equity in the property
  • If they think you haven’t paid the debt despite having the ability to do so
  • If they think it’s the only way they’ll get their money back

Granting an order of sale

The court will only give consent for an order of sale following a hearing. This is an opportunity to explain your circumstances so it’s important to attend this court hearing.

Prior to the court date, you should find expert advice to ensure you’re prepared for the hearing and you can ask a legal representative or adviser to join you.

An order of sale can be granted for the following reasons:

  • The debt and property are only in your name.
  • If the property has joint owners and the debt is in both names.
  • The property is jointly owned but the debt is only in your name, however, this can be more difficult. Joint owners should attend the court hearing to explain their situation.

However, if the district judge decides forcing the sale of a property would be unfair on someone not responsible for the debt then the order of sale won’t be granted. It will also consider the interests of the family as a whole when determining whether to grant an order of sale.

Reason the order of sale may not be granted

The judge will take into consideration the equity level of the home, the reason behind why you bought the home (for example, whether it is a family home or has specific disability access), the wellbeing of dependents and if there’s any other way to pay back what you owe such as through an attachment of earnings order.

If you believe that any of the reasons above relate to you, you should inform the court. You can also make an offer of payment at this stage and ask to make regular repayments towards the debt in return for not selling the property.

In order to do this, you will be required to submit a financial statement that provides information about your current situation. Another alternative is to ask to suspend the order which would delay the sale until a suitable time. This may be an option if you have young children for example.

Does a charging order show on your credit file?

A charging order won’t appear on your credit file on its own, but that doesn’t mean you won’t have a mark on your record.

Charging orders are a consequence of County Court Judgments, and CCJs will show up on your credit file. The original CCJ will remain on your credit file for six years from the date of issue, which may make it more difficult for you to access credit during that time.

When does a charging order expire?

Unlike other types of court order, a charging order doesn’t expire. The order will remain on the Land Registry until the debt has been paid in full. Once you have repaid what you owe, you can apply to the land registry to have it removed.

If you are a resident in Scotland, however, a charging order will expire eventually, after a period of 12 years.

Where can I find debt advice and get help dealing with a charging order?

Living with a charging order can be a horrible situation. It puts you under pressure to keep up with payments to creditors in a bid to avoid losing your home. That’s not a comfortable living situation for you or your family.

That’s where IVA Plan come in. We work in partnership with some of the leading debt management companies in the United Kingdom, and we specialise in debt solutions for all kinds of debt.

Our team can offer you free debt advice, and give you all the information you need to take control of your debt. For free, confidential debt help, reach out to IVA Plan today.