What is a charging order? If you have found yourself in court, facing a county court judgement for repayment of debt arrears, (which can include unsecured debts, for example credit cards and personal loans) and are not able to pay, your creditors can apply for a charging order instead. A charging order can force you to sell your home and also any other financial assets such as stocks and shares. There are some steps you can take, even at this stage to prevent this happening.
Instalment orders - An order issued by the county court, which allows you to repay your outstanding debts by instalments. Your creditors cannot use a charging order if you are up to date with your instalments. There were plans from the Ministry of Justice to enable creditors to force the sale of your property regardless of whether such instalments were up to date or not, but these plans have been cancelled. You must attend court when required to provide proof that you have an instalment plan in place and are completely up to date with instalments.
In 1987, a precedent was set that a charging order could only be made if you had been instructed to pay off a debt with a lump sum and failed to do so, or if instalment payments on a judgement were in arrears. ( Mercantile Credit V Ellis)
It is possible that a last minute argument that even if you had failed to make a promised lump sum settlement, it would be more suitable option for you to agree to either an 'attachment of earnings' where a fixed payment is deducted from your salary, or an instalment plan.
The most important element in your defence is to establish you are willing to repay the outstanding debt,(and to make sure you keep up regular payments).Even if a charging order is granted, your creditor may not be able to force the sale of your home if you can prove you have other monies which could go towards the debt.
Negative equity - The difference between the value of your property and the outstanding amount of your mortgage is called the equity. If your home is worth less than your outstanding mortgage, then you have 'negative equity' and you could argue that there is no point in selling, because there would be insufficient funds to pay your creditors.
Time order - Ask the courts if they will consider a 'time order' before they grant a charging order. This can help you by extending the repayment period for your debt, thus reducing your monthly payment.
Administration orders - An administration order means you make a regular, fixed monthly payment to the court, saving you from dealing directly with your creditors. The court will distribute your payment on a pro rata basis between your creditors each month.
Hardship - You could point out to the courts how your family will suffer if your creditors force the sale of your property. If the debts are in your sole name then your partner or spouse will also suffer, and so is being treated unfairly. Your partner or spouse must file their objections at least 7 days before the hearing for this to be considered.
If a charging order is still granted, it only applies to your half of the property. You can also ask the courts to declare that the property cannot be sold until any dependent children have grown up. Finally, bear in mind that almost any lender will be prepared to wait for you to sell the property and pay them from the proceeds. It is very unusual for the lender to take charge of the sale. However, be aware that a creditor can apply to the court for the right to sell the property on your behalf. This is called an 'order of sale'. Make sure you understand exactly what your creditor is proposing.
Unfair - It is possible to argue that a charging order forcing the sale of your 150,000-pound home in order to settle a 1500-pound credit card debt is simply unfair. Your property could rise in value over the years and you would lose out financially. A commitment to repay the debt by instalment order would be fairer.
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