Charging orders: How your home could still be at risk if you fall behind with an ‘unsecured’ debt

Borrowers taking out credit cards, loans and any other unsecured debt could be in for a surprise if they become unable to keep up repayments.

These products are usually being sold as unsecured debt, but what many people don’t realise is that they can end up being turned into a secured debt with the use of charging orders.

If you fall behind with repayments on a debt of as little as £1,000, the lender applying for a charging order could mean that you are forced to sell your home.

Since 1st October 2012 a provider of a credit or store card, personal loan, payday loan or even a catalogue company can apply for a charging order on a debtor’s assets. Even in cases where the debtor is making the agreed payment under terms set by a County Court Judgement (CCJ) the lender can apply for a charging order.

Prior to 1st October 2012 it was a little more difficult to obtain a charging order as creditors could only apply to secure one on unsecured debts if they first issued a default notice, then applied for a CCJ. Only when the borrower missed a payment could they apply for a charging order.

Now, all they have to do to apply for a charging order is successfully secure a CCJ and at the same time submit an application for a charging order.

Charging Orders – The Main Facts

1. You may find that your home is at risk through a charging order from all sorts of unsecured debts, including bank loans and credit cards with balances outstanding.
2. A creditor can only apply for a charging order if they have already taken out a County Court Judgement (CCJ) against you for falling behind on debt repayments.
3. If a lender tells you that they are going to take you to court to apply for a charging order, you must act quickly as delays will only cause complications.
4. The court must consider your circumstances before granting a charging order, so you can argue against one if, for example, you can clear your debts in other ways or show that a charging order would be unfair on people who live with you.

Post courtesy of Mirror.