A charging order secures a debt you have with a creditor against your property. This means if you sell or remortgage your home before the debt is cleared the charging order will be have to be paid off from the proceeds.
A creditor can only get a charging order if they already have a County Court judgment (CCJ) against you. A charging order turns an unsecured debt into a secured debt.
Receiving a charging order does not always mean you will lose your home.
If you’re worried about not being able to deal with a charging order and debts you’re struggling to pay, get in touch with us for free and confidential debt advice.
When can my creditors get a charging order?
For all CCJs issued on or after 1 October 2012 your creditor can get a charging order even if you’re up to date with the CCJ payments the court ordered you to make.
If your CCJ was issued before that date, the creditor could only apply for a charging order if:
- You missed a payment on the instalments the court ordered you to pay to your CCJ, or
- You failed to pay the whole amount immediately as ordered by the court (this is called a judgment forthwith)
If you kept up with the payments the court set, your creditor can’t apply for a charging order. If the CCJ was set forthwith, asking you to pay in full, you can avoid a charging order by asking the court to change this to payment by regular instalments instead.
What is the difference between an interim charging order and a final charging order?
Applying for a charging order involves two stages: the interim charging order and the final charging order.
Interim charging orders
If your creditor decides to apply for a charging order:
- Your creditor sends a form to the court along with proof from the Land Registry that you own, or jointly own, your house
- If the court agrees that you own a share of the property and a charging order is allowed under the rules above, you’ll be sent an interim charging order on form N86 and a copy of the creditor’s form N379. These show the reasons they’ve applied. This is also sent to your spouse or civil partner, any other joint owners of the property and your mortgage company or other secured lenders
- A restriction will be placed on the Land Registry, stopping you from selling your house until the final charging order hearing. You will get a form B136 from the Land Registry telling you this has happened. You don’t need to reply to this form
The interim charging order is issued without a hearing. If you do nothing, a final charging order will be issued 28 days later.
If you want to object to the final charging order, you must write to the court and creditor within 28 days of receiving the interim charging order. The court may then arrange a hearing to make a decision.
Reasons to object might include:
- The property doesn’t belong to you, and you are not entitled to a share of any equity in it
- The CCJ happened before October 2012 and you’ve not missed any instalments set by the court
- The creditor has not followed the application process correctly, for example they’ve not informed your spouse or civil partner
You can also write to ask the court to set conditions on the charging order. One condition that we recommend asking for is an affordable instalment order, if one is not already in place. This is where the court sets a regular payment. If the court agrees to this and you keep up with the payments, the creditor will find it much harder to take further enforcement action through the court.
If no instalment order is set there’s a risk the creditor could take further action, for example by instructing enforcement agents (bailiffs) to visit. If your CCJ was dated 1 October 2012 or later, an instalment order which is up to date also prevents the creditor applying to force the sale of your home.
Final charging orders
For the second stage of the charging order process, if you’ve not made any written objections, a court officer or sometimes a District Judge will decide whether to make a final charging order.
If you wrote to the court and creditor with objections, or you requested other conditions are applied, the court may arrange a hearing to decide whether to make a final charging order.
The hearing will be at your local County Court hearing centre. The hearing will usually be in private chambers with a District Judge and normally a representative from the creditor. The judge will listen to both sides and decide whether to make the final order or not, and what conditions if any are to be applied.
Once a final charging order is made, you’ll get a letter from the court confirming this on form N87.
Does a charging order show on your credit file?
Charging orders aren’t recorded separately on your credit file, only your county court judgment is recorded. CCJs remain on your credit file for six years from the date they were issued.
Does a charging order expire after 12 years?
The charging order on your home is recorded on the Land Registry until you pay the debt in full. It can then be removed by applying to the Land Registry. The 12-year expiry only applies in Scotland.
Charging orders and houses in joint names
If you own your home with someone else and one of your creditors decides to apply for a charging order, the person you own the house with will be told about it.
Charging orders can have an important effect on jointly-owned properties if someone dies.
Most couples own their home as joint tenants, meaning if one person dies, the property passes straight into the sole ownership of the surviving partner. A charging order changes a joint tenancy into a tenancy in common. This means the share of the property owned by the person who died will form part of their estate and won’t pass automatically to the other person.
Other types of charging order
Charging orders are most commonly used by creditors to secure debts after a CCJ. But there are other cases where a charging order can be used:
- Legal aid: If you get legal aid help with a court case, in some cases the Legal Aid Agency can apply a charging order to your home. This recovers the legal aid help you were given when you sell or remortgage your home. This is called a ‘statutory charge’
- Bankruptcy: If you go bankrupt and you have equity, your house will normally be sold. But if you only have a small amount of equity, the official receiver may get a charging order instead. This means if you sell or remortgage your home after your bankruptcy has ended, some of your equity will be paid to the official receiver
- Council tax: If your local council obtains a liability order for unpaid council tax, they can apply to place a charging order on your home. This is only likely to happen if the council can’t get the money any other way, such as by using bailiffs or an attachment of earnings. Find out more about dealing with council tax arrears
Interest on charging orders
If a creditor takes court action for a debt which is regulated by the Consumer Credit Act:
Interest stops at the point the CCJ is issued. This includes overdrafts, personal loans, payday loans, store cards, credit cards and similar debts. In very rare cases, interest can continue on a debt after a CCJ if the original contract allowed this.
If the charging order debt was not regulated by the Consumer Credit Act:
And if it’s over £5,000, statutory interest of 8% is added. There’s no way to stop or reduce this. Examples of this include benefit overpayments, utility bill debts or council tax arrears.
Legal aid or bankruptcy charging orders of any amount have 8% interest added, and again this can’t be stopped.
Find out more about your rights and the Consumer Credit Act.
What is an order for sale?
If you have a charging order, you need to keep making some payment to the debt. If you don’t, the creditor could apply to the court for an order for sale. This would force you to sell your house so the creditor can get their money back.
If your CCJ was dated on or after 1 October 2012, the creditor is not allowed to apply for an order for sale if the court told you to pay the debt by instalments and these are up to date.
Orders for sale are only possible for debts of £1,000 or more.
In practice, orders for sale are very rare.
The Ministry of Justice no longer publishes statistics on these, but the last figures they released, in 2014, showed an average of only 19 orders for sale each month in the whole of England and Wales, compared to around 3,600 final charging orders a month.
If a creditor applied for an order for sale, there would be another hearing and you would have a chance to explain your situation to a judge. The order for sale will only be granted as a last resort.
Worried about charging order or CCJ?
If a CCJ or charging order has been issued because you’ve not been able to repay what you owe, this is a sign you might need help. iF YOU NEED HELP – CONTACT US.