What is a Charging Order?

A charging order is a way of securing an unpaid debt against your home. This means that if you sell or remortgage your home before the debt is paid off, the charging order will make sure any money you make will go to pay off what you owe.

Charging orders are a complicated area of the law around debt. In this guide, we’ll explain everything you need to know in non-legal language, so you know what to expect if you’re contacted about a charging order.

Charging orders – an overview

A charging order is kind of court order that a creditor (a person or company you owe money to) can apply for to force you to repay an unsecured debt that you owe.

Charging orders are a step that comes after the creditor has taken previous court action against you. Usually, this will mean that a charging order comes after a County Court Judgment (CCJ).

First, a creditor will apply for an interim charging order, then a final order if the court feels it’s appropriate.

The order will be dealt with by the County Court Money Claims Centre – and if they approve it, it turns your unsecured debt in one which is secured against a ‘beneficial interest’ in land. The term ‘beneficial interest’ can mean any kind of land or property – but for most people, it means your home.

This means that your home could then be at risk if you do not make the payments you have been ordered to make.

If you don’t pay, or you stop paying the amount you’ve been ordered to pay, the creditor can go back to the courts and apply for an ‘order for sale’. This forces you to sell your home so the debt can be repaid.

What kinds of debts are charging orders used for?

There’s no single kind of debt that charging orders are used to secure – but there are some typical examples, including:

• CCJs relating to unpaid credit debts
• Unpaid child maintenance or council tax arrears
• Benefit overpayments that have been ordered to be repaid
• CCJs relating to unpaid utility bills

Debts are usually categorised as being either ‘priority debts’ or ‘non-priority debts’. While things like personal loan repayments are considered non-priority debts, if you receive a CCJ because they haven’t been repaid, they are then considered priority debts.

All charging order debt is considered priority debt.

Understanding the full charging order process

Although the overview above gives you a snapshot of how charging orders work, there are lots of steps that a creditor needs to take to have one put into action.

We’ll explore each of these steps – as well as your rights and things you can do to possibly stop the charging order or order for sale.

When can a creditor get a charging order?

Charging orders are only available to creditors who already have a CCJ against you.

The rules around getting a charging order are slightly different depending on when the CCJ was issued.

To understand which rules apply to you, take a look at the CCJ paperwork you have. Make sure you check:

• The date that the creditor applied for the CCJ
• The date that the CCJ was granted
• What the CCJ says about the payments you must make

For County Court Judgments issued before 1 October 2o12

For CCJs issued before October 2012, the creditor you owe money may apply for a charging order if you:

• Have missed the deadline set for paying off the debt in full
• Have an approved payment plan set up and you’ve missed a payment

Unfortunately, even if neither of these applicable to you, the creditor can still apply and there will still be a court hearing. Don’t panic though – if you haven’t missed the payment deadline, you can show the judge that you’ve kept up to the terms that were ordered.

If you have missed payments, you might decide to catch up with them before the hearing date. If you can do this, the judge won’t issue a charging order.

For County Court Judgments issued after 1 October 2012

In 2012, changes were made to the Charging Orders Act 1979 – the official piece of legislation that the courts use as legal guidance.

If your CCJ was issued after 1 October 2012, the creditor can argue that they require a charging order, even if you are up to date with payments and within your full repayment timescales.

You might feel like you have nowhere to turn if this is the case – but there are legal arguments against a charging order being made. The district judge will consider these – but it’s useful to have a legal representative make this appeal on your behalf.

How does a creditor apply for a charging order?

Another change to the Charging Orders Act 1979 was made on 6 April 2016. This adjustment changed the way that the application for a charging order is made.

This following information about explains the new rules.

There are two stages that the creditor and the courts must go through before a charging order is put into force.

Step 1: The interim charging order

If a creditor decides to apply for a charging order against you, the court will immediately make an ‘interim charging order’.

Don’t worry – this is not the final charging order, simply a first step taken to make sure the debtor (the person that owes the money) doesn’t sell the property before the court can make an informed final decision.

At this stage, you can object to an interim order being made – but you only have 14 days to do so and there are only a very limited number of reasons why the court would stop the process.

The interim charging order is usually made by a court officer without a hearing. However, the application will be referred for a hearing with a judge if:

• You are fully up to date with an instalment order that was made before 1 October 2012; or,
• The court officer thinks there is a reason why a judge should consider the case

If the decision is made by a court officer, your creditor must send you a copy of the interim order within 21 days of it being granted.

If the decision is passed to a judge, they have a series of options. They can:

• Make the order
• Refuse to make the order
• Make the order, then set a hearing date where they will decide about making the final order

Assuming the interim charging order is made, this puts a ‘notice’ or ‘restriction’ on your home with HM Land Registry – the government department that records the ownership of all land and property in the UK.

Step 2: The final charging order

After the interim charging order is made, a judge will go on to make a decision about whether a final charging order should be made.

This will usually be done without a hearing unless the judge previously decided there should be a hearing when the interim charging order was made or you think there should be a hearing for you to contest the final charging order.

If you think there’s a reason why the final charging order shouldn’t be made, you have 28 days to let both the court and the creditor know that you object and what your objections are. This should be done in writing.

If you do object, the judge will organise a hearing at your local court hearing centre – referred to as the ‘judgment debtor’s home court’. It’s absolutely essential that you attend this to make your objections known – if you don’t, the court is likely to approve the order final without your concerns being heard.

If for any reason you cannot attend the hearing on the date that the judge arranges, you should ask for it to be rearranged explaining why you cannot attend.

What happens if your home has joint owners?

If an application is made for a charging order on your home, HM Land Registry will inform everyone with an interest in the home. This will include any mortgage company and other property owners – such as a spouse or partner.

How the charging order effects joint owners of a home depends on who the debt belongs to and how the ownership of the house is organised.

If the debt is in joint names and your home is also in joint names, the court will can make a charging order or order for sale on the whole property.

If the debt is just in one person’s name and the home is owned jointly with someone else, then the court can only make a charging order on the share of the property you own.

How can you stop a final charging order?

We’ve talked a little bit already about appeals procedures that you might decide to make use of through the interim charging order and final charging order process – but it’s worth looking at them in a little more detail.

It’s useful to know a little bit about how the law works to understand why you might want to appeal the process.

When a creditor applies for a charging order, the judge who oversees the process will looking for a ‘burden of proof’ to come from the debtor (you) – rather than the creditor.

‘Burden of proof’ is another legal phrase. It really means who’s job it is to prove their side of the story. Since the creditor likely already has an active CCJ against you – it becomes your job to prove that the charging order shouldn’t go ahead, rather than the creditor having to prove that it should.

Every case is a little different, but there are certain common issues that will come up that will cause a judge to reconsider the case.

Is it your debt?

Perhaps the most obvious thing to think about is whether or not you are liable for the debt. It’s unlikely that an issue would have come so far without you being the person responsible – but it’s not impossible, especially if it was a joint debt with a partner or a family member.

What are your personal circumstances?

The judge will take into account changes in personal circumstances when thinking about whether a final charging order or order for sale is appropriate. Therefore, you should discuss any changes to circumstances, job changes, income problems – and so on.

Can you make a new offer of payment?

Although it might not feel like it, both creditor and judge will almost certainly prefer that you pay the debt, rather than go through the final charging order or order for sale process. Therefore, if you can make a payment or set up a payment plan, this will be considered.

Are you going through a divorce or dissolution of civil partnership?

If you are currently in the middle of – or soon to be in – the process of divorce or dissolution with a civil partner, you should always make an objection against the final charging order or order for sale.

The judge will then refer the case to the family court, where the charging order application will be considered alongside any claims for the property made my family solicitors.

Have you stuck to the previous terms?

If you haven’t broken the terms of any previous payment plan that is currently set up, the judge will want to know why the creditor applied for a charging order. Without good reason, the judge may decide that your previous plan can continue.

How big is the debt compared to the value of your home?

A judge will decide whether a charging order or order for sale is the most appropriate way of recovering a debt based on the value of the debt and the value of the property.

If the debt is small and the value of your house is significantly more, an order for sale might be considered excessive and the judge may order that the repayment is made through other means.

Will other creditors be affected?

The judge will carefully consider whether or not other creditors would be treated unfairly if you’re forced to sell your home. Many properties have mortgages tied to them – and it’s not uncommon for other charging orders to be secured against a home.

It’s the judge’s job to consider these factors and decide whether a final charging order or order for sale is the right step and will protect other creditors’ interests.

Will other people be affected?

The judge will also consider how a charging order and order for sale could affect the people who also live in the house.

They will consider any hardship or suffering that a forced sale may cause. Therefore, it’s essential that you let the court know about other people you live with and their personal circumstances. This is especially important if the other people who rely on the house are children or have any additional needs.

Other people who live with you in the house will be asked to talk to the judge at an appeal. They may want to talk about all the circumstances that could impact them, including:

• Why they shouldn’t have to leave the home when it’s not their debt
• If they paid towards the home – even just the deposit
• If they need to stay in the area to carry on with work or education
• If they rely on family support from people near to the home

Even if these factors don’t change the judge’s mind about issuing a charging order – it may prevent the final order for sale. For example, sometimes the judge will decide that the order for sale should not be enforced until children have grown up.

Will a final charging order always become an order for sale?

Sometimes, the charging order process will end at the point that the order is set into motion by the judge.

In effect, this acts like a deterrent to the person who the charging order is issued against – if payment is not made, then the creditor can take things to the next level and ask the court to force the sale of your home.

Try not to worry though – this is rare, just a fraction of charging order cases are immediately progressed to become an order for sale.

However, in some cases, this will be the automatic next step for the creditor – especially in cases where the amount owed is large.

There are some cases where a creditor will not be able to get an order for sale. For example, if the debt is less than £1,000 (including court costs) and is covered by the Consumer Credit Act (as many personal loans and credit cards are) – then the order for sale will not be approved.

What happens if the court issues an order for sale?

The order for sale process involves taking control of the property so it can be sold.

Even at this stage, you’ll be given an opportunity to settle the debt. Usually, you’ll have 28 days to either pay the debt or leave the home.

If you cannot or do not pay the debt, what follows is a complex legal situation for the creditor – and you should always seek legal advice if this is where you find yourself. If you have legal representation you should speak to them urgently – and Citizens Advice will also try to help.

The creditor will try to gain vacant possession of the property as quickly as possible – meaning you will be evicted. This will usually be done with a ‘warrant of possession’ – which court officers will enforce. This means bailiffs will come to your home to make sure you leave – they may even force entry and change locks if necessary.

You could be eligible for social housing if this happens – but it’s not the creditors’ or the court’s responsibility to support you in any way should you find yourself with nowhere to go.

When the property is sold, the debts secured against it will be settled. This will usually mean the debt and the costs that the charging order relates to – and any outstanding mortgage. If there is money left beyond these debts being settled, the creditor’s legal team will communicate with you to organise you receiving these funds.

Who pays for the charging order and order for sale process?

As you can probably tell, there’s a lot of expensive legal work involved with obtaining a charging order and order for sale. There are even more costs if a warrant of possession is issued and you have to be forced to leave the property.

Almost all of these costs will be added to the debt you owe. Often, these costs will add up into thousands of pounds – and may even be more than the original debt.

What happens if you pay off a charging order?

Although we’ve covered lots of ‘worst case scenarios’ here – most charging orders are paid off before they become an order for sale.

If you pay off what you owe, you can apply to the court for the final charging order to be registered as ‘discharged’. This means the debt no longer exists and the final charging order no longer stands.

The court will issue a ‘certificate of satisfaction‘ when they see evidence of full payment. With this certificate, you’ll be able to ask for the Register of Judgements, Orders, and Fines to be changed – which can significantly improve your chances of getting credit in the future and rebuilding your financial life.

How can debt solutions help to prevent charging orders?

Since a charging order almost always comes after a CCJ has been issued, some debt solutions can help to settle the CCJ debt and prevent the charging order being required.

Since charging orders and the circumstances that lead up to one being issued are often very complicated, it’s a very good idea to seek debt advice if you’re considering applying for a debt solution could settle your debt and stop the situation becoming out of your control.