If you have been issued with a CCJ and have not paid, and you own property, your creditor may apply to have a charging order restriction placed on your home. Any charging order will be registered at the Land Registry so you would be forced to repay if/when your property is sold.
Understand the finer details of a charging order in this new MoneyNerd guide.
What is a charging order on a property?
If a creditor has taken you to court about debt, you may have been issued with a County Court Judgment (CCJ). This is a court order that requests you repay your debt in full by a specific date, or requests that you agree to frequent repayments over time to clear the full amount owed.
A charging order is a further order that the claimant can apply for after the CCJ is issued. It secures the value of your debt against a property or any land you own, meaning you repay from any future property sale.
The debt could be enforced in other ways, such as using bailiffs or by taking payments from your wages before it lands in your bank account.
What is an order for sale?
An order to sell is another legal order that a claimant may ask the court to issue, which is a serious order that asks you to sell your home or land relatively quickly to repay the debt.
Any money raised from the sale of the house will be first used to repay your creditors.
Using beneficial interest to stop a forced sale
If you own a home with another individual – known as beneficial interest – but that other individual isn’t listed on the CCJ, the charging order is only secured on the percentage of the property the debtor owns, typically 50%. This is to protect joint homeowners who have not gotten into debts from losing their home equity because of the other person.
The creditor can request an order on the whole house if both owners are named on the CCJ.
However, when someone is a joint owner but is not in debt, this can make it difficult for the claimant to be granted the aforementioned order that forces you to sell – but not impossible.
When can a creditor apply for a charging order?
Creditors can apply for an order straight after the CCJ has been issued by the court. Before October 2012, creditors would have to wait until a payment was missed before applying for the order.
This is no longer the case and they can request it immediately.
Charging order application – stage by stage
When a creditor applies for a charging order, the process is split into two stages:
- Interim order
- Final order
- Interim charging order restriction
The creditor will first apply for a provisional or interim order, which is essentially used as a restriction to prevent the debtor from selling their home before the case is properly assessed by a judge. There is not usually a hearing for this.
Adding the charge to the Land Registry
The creditor will register the charge on the home to the Land Registry, which is a formal process to make sure the owner cannot sell the house. This register tracks ownership and other details of land across England and Wales.
You can browse the register here.
Can an interim order be removed?
An interim order can be removed if the individual pays back the money owed in full. They can then ask the Land Registry to remove the order as well.
- Final charging order
The final charging order will be decided by a judge. You will have 28 days to reply from the date of the interim order, and if you do, a hearing may be needed. If you do not reply to the interim within 28 days, it may not be required and the judge can make a decision without speaking with you under the Charging Order Act 1979.
You may be able to stop the final restriction from being granted if you prove you have not missed payments since the CCJ and/or if you prove there is no equity in your house.
If the court grants this order, the claimant can then proceed to apply for the order that forces you to sell your house. You could ask the judge to add conditions that prevent this from happening easily.
The claimant may even be allowed to ask for interest to be applied once the order is made final. This added interest will increase the amount of debt you owe gradually, meaning it’s best to pay it off as soon as possible. If you are feeling anxious and worried, speak with one of the many helpful debt charities.
How long does a charging order last on a property last?
Charging orders can only expire after 12 years if you live in Scotland. If your home is in England or Wales then the charging order has no expiry until the creditor is paid back
Can you sell a property with a charging order on it?
An owner can sell their house with a charging order on it as long as there is enough equity in the home sale to repay the money owed, as stated in the CCJ. Most of the time this means you can sell your home after a charging order is made on it.
If the sole reason you are selling your house is to give the creditor the money owed, you may want to search for other debt solutions that will help you repay while keeping your home.
Charging Orders FAQs
How do I get a charging order removed?
If you pay the money owed, you can ask for the charging order to be removed. However, in most cases, the business/claimant will let the Land Registry know that the money has been repaid and they will remove the charging order for you.
Does a charging order expire?
Charging orders only expire in Scotland after 12 years. In the rest of the UK, they do not expire.
What happens if an interim charging order is not made final?
If the interim charging order is not made final by the court, maybe because the debtor convinced them it was not the right course of action, then the debtor will still owe the money. The creditor could use other enforcement action if the money is not paid, such as bailiffs.
Does a charging order affect your credit rating?
A charging order can only come after a court judgment has been issued against you. This judgment will severely harm your credit rating because it shows that the arrears were not cleared before resorting to legal action.
But it is not impossible to get a good credit rating after having one of these judgments. It can take time, but managing your money and learning how to budget accurately will assist you in improving your credit score again, making it more likely to be approved for future credit or a mortgage.
Is a charging order a priority debt?
If you have a charging order for a debt, that debt has now been secured against your asset. This makes it now a priority debt, which you should prioritise to repay before some other types of debts.
Once you have paid your priority debts you should concentrate on paying back the others.
Get professional advice!
For more charging order info, and to get advice relating to your personal circumstances, it’s best to speak with a charity. For example, Step Change offer tailored money advice for every caller. They will be able to provide accurate and confidential advice relating to your situation.