Charging Orders

A charging order is a process that creditors may apply to recover money owed to them when other methods have failed. It is an order from the court placed on a debtor’s property (house or land) for the amount owed. Effectively, this converts an unsecured debt into one secured on the property.

The process can be used by any creditor including finance companies, local authorities, utility companies and private individuals.

It is extremely rare for a creditor to seek possession of a borrower’s home as a result of a Charging Order. In the most cases, creditors would wait for a borrower to sell their home at some point in the future and would be paid out of the proceeds at that time.

Charging Orders are not awarded automatically.  The court will consider whether it is reasonable to make the Order, taking into account all the circumstances of the case. This would include details of the borrower’s personal situation, for example, family circumstances and the value of the debt in comparison to the amount of equity in the property. If the property is in negative equity, it is unlikely that a Charging Order would be awarded.

Summary of key points:

  • The lender must have issued a County Court judgment, and the debtor failed to make payments on that judgment, before a court will consider an application for a Charging Order.
  • The court will consider whether it is reasonable to award a Charging Order, taking into account all the circumstances of the case and the personal circumstances of the debtor.
  • It is very rare for a Charging Order to result in the sale of a debtor’s home.
  • Where a Charging Order has been awarded, it allows the creditor to take a more flexible and long-term approach to the repayment of a debt.

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