Some debts are classed as ‘unsecured’, which means your assets (e.g. your home and car) are protected and can’t be seized if you fail to make repayments towards what you owe.
However, if you continually fail to make payments towards what you owe, your creditor can take action to secure the debt to your property – immediately putting your home at risk of being sold to make up for the money owed.
What is a charging order?
A charging order is a type of legal action that your creditor can apply to the court for to secure an outstanding debt to something you own – typically your home.
Usually, a charging order is used as a last resort when your creditor has exhausted all other options to recover the debt and has previously issued a County Court Judgment (CCJ) against you. County Court Judgments (CCJs) are court orders instructing you to pay a debt.
Once you’ve been served with a charging order, the debt immediately becomes a priority debt. This means that it must be paid before any other debts and if you continue to ignore it, your creditor can force the sale of your home to recover the amount owed.
Furthermore, if you try to sell or remortgage your home after receiving a charging order but before the debt has been settled, the money from the sale must be used to repay the debt.
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How does a charging order work?
The application process for a charging order is made up of two key stages: an interim charging order and a final charging order. We’ve outlined them both in more detail below:
Step 1: Your creditor applies for an interim charging order
The first thing your creditor must do is apply to the County Court Money Centre (CCMC) for an interim charging order. This is a preventative measure designed to stop you from selling your property or hiding your assets before a final charging order can be put in place.
The court will then review the information provided and, if they are satisfied that you meet the criteria, they will issue you with an interim charging order. They will also send you (and anyone else with interest in the property) a copy of your creditor’s form which will explain why an application for a charging order was made.
The Land Registry – which is the government department responsible for registering land ownership – will also be sent a ‘restriction’ that prevents you from selling your property until a final charging order has been issued. They will notify you of this by post.
Step 2: You receive a final charging order
The court officer or district judge overseeing your case will review all the circumstances and decide whether a final charging order should be made.
However, if you object to the interim charging order, a final charging order hearing may be scheduled before a decision is made. This will give you a chance to defend yourself and argue (with proof) why you shouldn’t be issued with a final order.
The court will take all your personal circumstances into account when deciding whether to serve you with a final charging order, including your household composition, income and expenditure, and whether the making of the order would unfairly prejudice any of your creditors.
The fees paid by your creditor in issuing you with a final charging order will be added to the amount you already owe and are non-refundable – even if a final charging order doesn’t go ahead.
Do you have to have a CCJ to get a charging order?
Because a charging order is such a a serious action, it can only be applied for after you have already received a CCJ.
However, how long after a CCJ your creditor must wait before applying for a charging order depends on when the CCJ was originally issued. We’ve outlined these dates in more detail below:
CCJs issued before October 1, 2012
For CCJs issued before October 1, 2012, your creditor can only apply for a charging order if you missed the deadline for paying the whole debt or you’re repaying the judgment debt in instalments and missed a payment.
Some creditors will apply for a charging order even if you haven’t met this criteria. When this happens, you should attend the scheduled court hearing and provide evidence to the judge or court officer to prove that you are up to date with your payments as this can stop the charging order in its tracks.
Making up for the missed payments before the court hearing can also stop the charging order from going ahead so it’s important to repay the debt as soon as possible if you’re in a position to do so.
CCJs issued after October 1, 2012
For CCJs issued after October 1, 2012, your creditor can apply for a charging order any time after getting a CCJ – even if you are up to date with your CCJ repayments.
They can also apply for an ‘order for sale’, which is a court order that can immediately force the sale of your home if you’re not up to date with your CCJ payments.
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Can you get a charging order for a jointly owned property?
Yes, a charging order can be made against any asset that you have ‘interest’ in. This includes any properties you own individually or jointly with someone else.
If the property is in your name and your name only, a charging order will be made against the whole property. This is commonly referred to as being served with a ‘notice’.
If you own the property jointly but the debt is yours, the charging order will still be made but only against your share or ‘beneficial interest’ in the home. This is known as a ‘restriction’ and means that if the property is sold, the debt can only be repaid out of your portion of the home’s equity.
Can I object to a charging order?
Being served with an charging order can be daunting and it’s normal to want to ignore it in the hope that it eventually goes away – especially if you don’t think you deserve it. The good news is that you can stop final charging orders from going ahead.
If you’ve been issued with an interim charging order and want to stop a final charging order from going ahead, you must send your written objections to both the court (Civil National Business Centre) and your creditor within 28 days. The court will likely arrange a hearing to decide what action to take.
Most people object to an interim charging order because they didn’t miss any payments as their creditor is claiming or because their creditor didn’t follow the right process when applying (e.g. they failed to notify others named on the property).
Can I get a final charging order removed?
Although rare, you may be able to get a final charging order ‘set aside’ (removed) under certain circumstances.
When a charging order is set aside, the debt returns to the ‘judgment’ stage and your creditor will have to apply to the court if they want to take further action against you. This can give you time to decide how you want to deal with your debt.
However, you can only apply to set aside a charging order if you believe the court made a rash decision without considering all the relevant circumstances and you must submit an ‘application notice’ as soon as possible.
Will a charging order be visible on my credit file?
Unlike other forms of legal action, a charging order won’t be added to your credit file. This means that lenders won’t be able to see that you have a charging order and it shouldn’t affect your ability to apply for credit.
However, a CCJ is a requirement for a charging order and this will be visible on your credit report for six years regardless of whether you pay it or ignore it. During this time, you’ll find it difficult to access most credit products (e.g. a mortgage, credit card, personal loan, bank account, or a phone contract).
Once six years have passed, any evidence of the CCJ will be wiped from your credit file and you’ll find it easier to access credit.
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Does a charging order expire?
One of the first questions among people who have received a charging order is when – or if – it expires. However, the answer to this question depends on where in the UK you live.
For example, if you live in England and Wales, a charging order never expires and will remain in place until the debt is paid in full. Once full payment is made, you can apply to have the charging order removed from your record.
However, if you live in Scotland, a charging order automatically expires after 12 years.
Does a charging order mean my house will be sold?
Even if you’ve received a charging order, it doesn’t necessarily mean that your house will be seized and sold straight away.
Once your creditor has been granted a final charging order, they can apply for an ‘order for sale’. This is a court order that forces the sale of your home and uses the money raised from the sale to pay off your outstanding debt.
However, it’s important to note that if you owe less than £1,000 (including court costs) and the debt is covered by the Consumer Credit Act (1974), your home cannot be forcibly sold.
Can interest be added to charging orders?
The rules around interest and charging orders depends on whether or not the debt is regulated by the Consumer Credit Act.
For debts covered by the Consumer Credit Act, all interest stops as soon as a CCJ is issued and continues after a charging order is put in place. This is the case for overdrafts, personal loans, payday loans, overdrafts, store cards, and credit cards.
For debts of £5,000 and over not covered by the Consumer Credit Act, a non-negotiable statutory interest of 8% is added. This applies to utility bills, benefits overpayments, and council tax arrears.
8% interest is always added to bankruptcy and legal aid charging orders regardless of how much debt is owed.
Conclusion
A charging order is a court order that takes an unsecured debt and secures it to your home, putting it at risk of being sold to recover the money owed.
Because it can only be applied for after a CCJ is already in place, it’s considered a serious type of action and shouldn’t be ignored.
You’ll be given a chance to object to a final charging order being made but you must do so within 28 days of receiving an interim charging order. Once a final order is in place, it can be very difficult to get it removed.
