Charging Orders are a potential method of securing a creditor’s debt which is in excess of £1,000. The Order must be secured by the creditor against the same property of the debtor to which the CCJ has already been obtained for the outstanding debt.
Charging Orders can be considered as an alternative to bankruptcy in some cases. Consideration must be given to the probable ongoing accrual of the annual creditor’s tax charge which may outweigh the advantages of this process. Therefore, this option must be considered carefully.
A charging order gives the creditor security for the debt; in other words, the debt would become ‘secured’ like a mortgage on the debtor’s house, or land. There must be a hearing in the County Court before a charging order can be made.
When Can the Creditor Apply for a Charging Order?
If the creditor has obtained a CCJ against the debtor ordering them to pay outstanding debt, they may be able to apply to the court for a charging order to enforce the judgment if the debtor does not pay and if you have been unsuccessful in recovering the outstanding sums by yourself.
How is an application made?
The application for a charging order always has two stages.
Stage one – the interim order
When the creditor makes an application for a Charging Order and the court will make what is called an interim Charging Order if it is satisfied that the debtor owns, or have a part share (an interest), in the property in question. An interim Charging Order is usually made automatically without a hearing and a date for a full hearing is set. A copy of the interim order will be sent to the debtor at least 21 days before the hearing date set by the County Court judge.
The hearing is for the court to decide whether or not to make the Charging Order permanent – Final. This hearing is likely to be held in the district judge’s private rooms.
The creditor will also register the interim Charging Order as a ‘caution’ on the debtor’s property with the Land Registry who should inform the debtor of this in writing. This means the debtor cannot sell the property before the hearing.
Stage two – The Final Charging Order
The second stage is the court hearing in front of the County Court judge. At this hearing, the court will decide whether to make a permanent charge on the property. This is called a final charging order. If the debtor objects to a Charging Order being made final, then they should send the creditor and the court written evidence stating why they object. They should do this at least seven days before the hearing. This could be in the form of a letter of objection outlining all the arguments the debtor has for why the Charging Order should not be made. This should be sent by registered post to both the creditor and the court. The court must consider whether it is reasonable to make a Charging Order and will consider the debtor’s circumstances.
1. The house is in joint names, but the debt is in the debtor’s name
If a Charging Order is made by the court, then it will only apply to the debtor’s share of the property.
If the creditor has taken the debt to the County Court, they may be able to add interest once a Charging Order is made.
What Does a Charging Order affect?
A charging order may be made against any item in which the debtor has ‘an interest. This usually means property that they own (or part-own) and will usually be their home. If they own their home in their sole name, then the house will be covered by the Final Charging Order. If they own their home in joint names with someone else, then the Charging Order will cover their share or ‘beneficial interest’ in the property.
Can the creditor sell the debtor’s home?
Technically, yes. If the creditor has a Final Charging Order, it could apply to sell their home to pay the debt although it is up to the court to decide whether to make an order for sale or not.
The court can order a sale where |
- the debt is in the debtor’s sole name, and they are the sole owner, or
- the debt is in both names of the joint owners of the house.
- if the debt is in your sole name and the house is in joint names, the creditor gets an
‘interest’ in the house once the Charging Order is made final. This means the creditor can apply to the court for an order for sale to realise their ‘interest’ in the debtor’s house. All joint owners (or a married person who is not a joint owner but has an ‘interest’ in the property) should be part of the court proceedings so they can explain their case to the court as well. They would be sent notice of the hearing and be allowed to attend.
Paying off a Charging Order
If the debtor pays off the amount they owe under the Charging Order, they can apply to the court for the order to be discharged. The amount they have to pay will include court fees and costs that have been added to the debt. The debtors can ask the court for a certificate of satisfaction on their County Court judgment and include evidence of payment. It is usual for the creditor to inform the Land Registry that the interim and final Charging Orders have been removed.
How to Apply for a Charging Order Using Shergroup’s Channel?
To apply for a charging order, you can use our online application and we will take care of the management of your application. Our form follows the format of form N379 for an application for a charging order against land or property or a form N380 for an application for a charging order against securities).
If you make the application using our online form you will pay us the fee online. In making the application you will the following information handy:
- details of the judgment, including when it was made, at what court and under what claim number.
- the full name and address of the judgment debtor.
- the amount of the judgment, including any costs and interest; the amount owing at the time of your application, again including any interest, and the total amount of any instalments, if any, which have not been paid.
- the address of the property or land on which you want to impose a charge.
- information as to whether the judgment debtor owns the property solely or jointly with someone else, and evidence to prove it.
- details of any other creditors you know the judgment debtor has, that is, their names and addresses and the nature of their debt.
- details of any other person who has an interest in the property.
- details of any additional reasons, apart from the fact you are owed the money, you want the court to take into account when deciding whether or not to grant your application; and details of sources of information.
Some, but not all, land or property will be registered at HM Land Registry. If the property is registered, we will obtain a copy of the register and attach that to the application we make on your behalf.
If you have a CCJ against your judgment debtor and you wish to take further action by applying to the County Court for a Charging Order, we can do it on your behalf. Applying a Charging Order to enforce it compels your debtor to make the full payment owed to you. Call us today one of our Shergroup Legal Advisor will be able to help you on all these matters and guide you with the way forward.
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