Charging orders explained
If you've been issued with a CCJ and can't keep up with your repayments, the court may grant a charging order. Here's what you need to know.
As explained in our recent blog What to do if court action is taken, if a County Court Judgement (CCJ) has been issued to you and you make payments as instructed, no further action should be taken against you by your creditors.
However, if you don’t keep up with your repayments, your creditor can ask the court to enforce it. Court enforcement may include the granting of charging orders and perhaps, consequently, orders for sale.
So what exactly does this mean?
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A charging order allows creditors to secure debts against a property you own, or in rare cases against shares or other assets, while still requiring you to make monthly payments towards the amount you owe.
If you subsequently sell your house but still owe money, the balance is paid off using the proceeds of the sale. If your house is jointly owned but your debts are just in your name, the charging order only applies to your share of the property.
When a creditor applies for a charging order, you will receive a letter telling you that the creditor has an interim order, meaning you can’t sell your house until the process finishes. You are given a date for a hearing in your local county court.
The hearing is your opportunity to tell the court why you haven’t paid your CCJ, and give details of your finances to justify why you should not be subjected to a charging order.
For joint mortgages, everyone with an interest in the property is informed of an order application, including your mortgage company, secured loan company and your partner.
One issue to be aware of is that some creditors may claim that a charging order gives them the right to start charging interest on the debts included in your original CCJ, but this is incorrect.
If your debt is regulated by the Consumer Credit Act (CCA), no further interest should be added after a CCJ is made. A charging order does not change this. However, statutory interest of 8% a year may be added to debts over £5,000 that are not CCA regulated.
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Orders for Sale
A further possible consequence of a charging order is that your creditor may then also apply to the courts for an Order for Sale, which gives the creditor the right to sell your house.
However, this is extremely rare and is only ever used as a last resort. Charging orders are quite often granted by the courts, but only a tiny proportion result in an order for sale.
If you can make at least some payment towards your debt and are not ignoring your creditors, it is very unlikely an order for sale will be enforced.
If a creditor does apply for an order for sale, this is a complex legal area, and the Consumer Credit Counselling Service (CCCS) recommends you not to deal with it on your own.
CCCS has a specialist counselling team that specifically helps people with mortgage arrears and other housing debt problems, which includes advising on CCJs, charging orders, and orders for sale.
You can contact the CCCS mortgage counselling team on the charity’s normal freephone helpline (0800 138 1111, 8 am to 8 pm, Monday to Friday), or online via CCCS Debt Remedy.