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Information about Charging Orders
A charging order is when a creditor has a county court judgment against you ordering you to repay a debt; to enforce the judgment when you do not pay the creditor may apply for a charging order. It basically gives your creditor security for the debt that is owed to them, by being secured against something e.g. your home, like a mortgage. However; before a Charging Order is put into place, there must be a hearing, and there are many arguments that you can use to try and stop the order from being made. A creditor can only apply for a charging order against you when the following have been put into place:
• You have a county court judgment against you
• You have been ordered to pay the debt straightway or by a particular date, but have not done so.
• The county courts order you to make payments in installments, but you missed one or more.
If you have kept up with installments on a county court judgment then the court should not make a final charging order. The order should only be made if the payments on a judgment are in arrears or you were ordered to pay the judgment in one lump sum and did not.
The application process for Charging Orders
There are two stages to the application of a Charging Order. Stage one is the interim order, stage two is the final charging order.
The Interim Order
You creditor can make an application to the courts for a charging order. The courts will then make what is an interim charging order if they are satisfied that you own, or have a part share in a property. This is usually made automatically without a hearing and a copy of an interim order will be sent out to you; however, this is the final order. This is usually done 21 days before a hearing date is set by a judge. At the hearing the courts will then decide to make the Charging Order permanent or not.
The Final Charging Order
At the court hearing the court staff will then decide if they are going to make a permanent charge on your property. This is the Final Charging Order. If you object, then you will need to send the courts and your creditor evidence as to why. This needs to be done at least 7 days before the final hearing. If you do this then your arguments will be taken into account by the Judge.
As the courts can refuse to make a Charging Order you must attend the hearing. If you can’t attend you must let them know well in advance so another date can be arranged. If you don not turn up, it’s likely the courts will make the Charging Order against you. If a hearing is in another court, you can ask for it to be transferred to your local county court. You should use the application form N244 to explain why you can't go to the hearing, e.g. due to the distance, travel or childcare costs. There is a fee for doing this.
Can you stop a Charging Order?
The courts will take into consideration if it is reasonable to make a charging order against you; the courts have to consider all circumstances of the case .e.g. your personal circumstances and whether making an order would give other creditors a disadvantage. Some other things the courts will consider are:
a. If any family members are considered disabled or have a serious illness.
b. If you have a number of debts and making a charging order in favor of one creditor would give them unfair priority.
c. If the creditor has listed all your other creditors in the application. This means that creditors who may want to object to the final order being may not know about the hearing.
d. Could the creditor have given you a secured loan when you first took out the loan?
e. Are there any other ways that the courts can enforce payment for the debt.
f. If your debt is covered by the Consumer Credit Act then you may be able to apply for a Time Order.
g. If you owe less than £5,000 in total to all your other creditors, then you may be able to argue that the debt should be included in an administration order instead.
h. If you are about to be made bankrupt.
i. If your home is worth less than the actual mortgage.
j. If the debt is extremely small compared to the equity in your house.
If none of the above are successful and the court goes ahead with the final charging order, you may ask them to not let your house be sold, providing you make the monthly installments. Ensure to make this offer at the hearing, however, if the courts will not look into this offer you can still apply for this with a N245 application form.
What if your home is in joint names?
If the debt is only in your name, but the house is in joint names, then the co-owner has a right to appeal against the Charging Order, providing they tell the court all the circumstances, and why they would suffer hardship if the order was put into place. They will receive a copy of the Interim Order, and be asked to attend the hearing. They must state the following:
1. Who paid the deposit?
2. Who makes the mortgage payments?
3. If you have children (you should ask the courts to put a condition on the house so it cannot be sold by the creditor until the children have grown up).
The co-owner must supply the courts with all evidence, at least 7 days before the hearing takes place. If the Charging Order is put into place, it will not affect their share of the property.
What if you are involved in Divorce Proceedings or recently separated from your partner (co-owner)?
In this case you need to get advice from a solicitor, as you may be able to stop the Charging Order being put in place. No interest can be added to the debt if the debt is for an agreement regulated by the Consumer Credit Act; or if it is less than £5,000 in total. If the debt is more than £5,000 and not covered by the Consumer Credit Act, then courts may set an interest rate.
Once the Charging Order is in place, can a creditor sell your home?
The County courts don’t often allow creditors who have a final charging order to sell your home. Creditors usually wait until you sell your home for the payment to be made, however; if they are not prepared to wait they can apply to the courts for a hearing for an Order for Sale. It is then the court’s decision if they will allow a sale or not to go through. Courts will order a sale when:
1. The debt owed is in your sole name and you solely own your home.
2. The debt and the home are both in the same joint names.
3. If the debt is in your sole name and the house is in joint names, the creditor can get an "interest you’re your house once the charging order is made.
The courts will however, look into if there is enough equity in your house to cover the mortgage and charging order. They will also look at when you bought the house and what you bought it for? If it was intended as a long-term family home? The welfare of your children will especially be taken into account, so you can argue that it is not fair for the whole family to lose their home because of your debts. Also state that, under The Trusts of Land & Appointment of Trustees Act 1996, the court has discretion to say the family's interests outweigh the creditor's interests.
What happens once the Charging Order is paid off?
Once the order has been paid off you can then apply to the county courts for it to be discharged. You should ask the courts for a certificate of satisfaction, and include all evidence of payments. Creditors do usually inform Land Registry Charging Orders have been removed.
You find your local District Land Registry by contacting:
Land Registry Headquarters.
32 Lincoln's Inn Fields
Tel No: 020 7917 8888
If there is equity in your house, then you can also pay off the charging order if you move, as the order will automatically be paid off as part of the sale.
County Court Fees
There is a fee made payable to your local county courts for a charging order; you can request for the courts to waver the fee in some circumstances. For this you will need an EX160 application form. You must send this along with your main application. In some cases you may be exempt from the fee for example:
• If you are on income support or income-based jobseeker's allowance (you must provide proof).
• If you or your partner are on the guarantee credit element of pension credit.
• If you are on working tax credit, whilst also on child tax credit.
• If you receive the disability or severe disability element in your working tax credit.
• If your annual for working tax credit is £15,460 or less.
You must supply your local county court with your tax credit award notice to qualify.
If you do not qualify for an automatic exemption then you can ask the court for the fee to be remitted; if you feel it will cause you undue financial hardship. You should use the same EX160 application form, when requesting this. Give as much information about your circumstances as you can and explain your financial situation on the application.