THE UK INSOLVENCY HELPLINE
CHARGING ORDERS IN THE COUNTY
F WHAT IS A CHARGING WHEN CAN A CREDITOR APPLY
A ORDER? FOR A CHARGING ORDER?
• If a creditor has a county The creditor can apply for a charging order if they
C court judgment against you
ordering you to repay a debt,
have a county court judgment against you and:
• You have been ordered to pay the whole debt
T they may be able to apply to
the court for a charging order
to enforce the judgment if
immediately or by a certain date, (this is known
as a “forthwith” judgment) and have not done
you do not pay. so.
• A charging order gives the or
S creditor security for the debt;
in other words, the debt • The court has ordered you to pay the judgment
would become “secured” like by instalments and you have missed one or
H a mortgage on your house, or
• If you have an order to pay the debt in
E • There must be a hearing in instalments and are not behind on the payments
the county court before a the court should not make a charging order.
E charging order can be made
and there are several
This is because of a very important case called
Mercantile Credit Co Ltd v Ellis in 1987. See
arguments you can use to try the section “I already have an instalment
T to stop an order being made. order” on page 4.
• This factsheet explains the HOW IS AN APPLICATION MADE?
court procedure in the county
court and what you can do.
N Some creditors can apply for
a charging order after taking
The application for a charging order always has
you to the High Court. If
O you think this may have
happened, or if you are not
STAGE ONE – THE INTERIM ORDER
sure what to do, phone us The creditor makes an application for a
for advice. charging order and the court will make what is
15 called an interim charging order if it is
satisfied that you own, or have a part share (an
interest), in the property in question. This is
NOT the final order. An interim charging
order is usually made automatically without a
Charging Orders in the County Court
hearing and a date for a full hearing is set. A
copy of the interim order will be sent to you. If the hearing has been arranged in another
This should be done at least 21 days before the court, ask for it to be transferred to your local
hearing date set by the District Judge. The court. You can apply on an application form
hearing is for the court to decide whether or not called an N244 explaining why you can't go to
to make the charging order permanent the hearing, e.g. due to the distance, travel or
('Final'). This hearing is likely to be held in childcare costs. There is a fee for doing this.
the District Judge’s private rooms. See the section on fees at the end of the
factsheet. Phone us for advice.
The creditor will also register the interim
charging order as a “caution” on your property
with the Land Registry who should inform you
HOW CAN I STOP A CHARGING
of this in writing. This means you cannot sell
the property before the hearing. ORDER?
STAGE TWO – THE FINAL CHARGING The court must consider whether it is reasonable
ORDER to make a charging order. Under The Charging
Orders Act 1979 the court has to consider all the
The second stage is the court hearing in front circumstances of the case and in particular:
of the District Judge. At this hearing the court
• The personal circumstances of “the debtor”
will decide whether to make a permanent
charge on the property. This is called a final • Whether any creditor would be “unduly
charging order. If you object to a charging prejudiced”. This means the court has to
order being made final then you should send decide if making a charging order would
the creditor and the court written evidence disadvantage other creditors.
stating why you object. You should do this at
least 7 days before the hearing. This could be The arguments you can use against the order
in a form of a letter of objection outlining all being made will vary depending on your
the arguments you have for why the charging circumstances, whether you have any other debts,
order should not be made. This should be sent whether you have equity in your house and own
by registered post to both the creditor and the your home in joint names or on your own. If you
court. have to go to a hearing phone us for advice.
These are some of the factors that the court may
If you do this then your arguments should be consider:
taken into account by the District Judge at the
hearing. You should still go to the hearing and • Does any member of your family have a
if you do not send any written evidence then it disability or serious illness?
is vital that you go.
• If you have a number of debts and making a
The court can refuse to make the charging charging order in favour of one creditor would
order so you must serve a notice and go to give them unfair priority over other unsecured
the hearing. If you cannot attend on that creditors. It is particularly useful if you can
date, contact the court for a different show you already have a payment arrangement
hearing date to be arranged. If you do not in place with your other creditors. This would
go, the charging order is likely to be made be upset by an order being made. Point out if
final by the court at the request of the any of the debts are larger than this debt and if
creditor. any other creditors have frozen the interest.
• Your creditor is supposed to list all the other
creditors that they are aware of in the
application for an interim charging order.
Charging Orders in the County Court
• The court can order the interim order to be sent made, as the creditor would not be paid off,
to the other known creditors but does not have even if they forced your home to be sold.
to do this. This means that creditors who may
want to object to the final charging order being
• If the debt is very small in comparison to the
amount of equity in your home, argue that a
made will not know about the hearing. You
charging order would be unfair.
can raise this in your written objections and at
the hearing if you think a creditor may be • You should point out any particular hardship
“unduly prejudiced” by the charging order which your family would suffer if a charging
being made. order was to lead to the sale of the home.
This is particularly important if the debt is in
• Could the creditor have given you a secured your name but you own your home jointly so
loan when you first took out the loan? If they
it is not even your partner’s debt.
decided to offer an unsecured loan instead, this
could be particularly relevant if you have other If none of these arguments are successful and the
unsecured creditors who may be disadvantaged court makes a final charging order, you can still
by a charging order being made. ask the court not to let your house be sold as long
as you pay monthly instalments. Make an offer to
• There are other ways the court could enforce pay in monthly instalments at the hearing. If the
payment of the debt. You could ask the court court will not look at your offer at the hearing,
to make an instalment order so you make you can still apply to pay in instalments by using
monthly payments you can afford, or an an application form called N245. For details of
attachment of earnings order so that the how to apply we have a factsheet on “Reducing
instalments would come directly from your Payments on a County Court Judgment”.
wages. This is only useful if you are employed Phone us for advice.
and your employment would not be at risk. We
have a factsheet on “Attachment of Earnings in THE HOUSE IS IN JOINT NAMES
the County Court”. Phone us for advice.
BUT THE DEBT IS IN MY NAME
• If your debt is covered by the Consumer Credit
Act you can apply for a Time Order. Ask the If the debt is in your sole name, but you own the
court to look at this application before the house in joint names with someone else, they have
charging order. A Time Order can change the the right to tell the court all the circumstances and
monthly payments and extend the length of why they would suffer hardship if a charging
time you pay the debt for. We have a factsheet order is made. They should have been sent a copy
of the interim charging order and given an
on “Time Orders”. Phone us for advice.
opportunity to go to the hearing to put their
• If you owe less than £5,000 in total to all your points. For example:
creditors, you can argue that the debt should be
• Who paid for the deposit to buy the home?
included in an administration order rather
than the charging order being made final. We • Who has made the mortgage payments since?
have a factsheet on “Administration Orders”. • If there are children at home, ask the court to
Phone us for advice. put a condition that the house cannot be sold
by the creditor until the children have grown
• If you are likely to be made bankrupt, you can up.
argue that a charging order would give the • The co-owner will need to file and serve
creditor an unfair advantage over other written evidence of their objections at least 7
unsecured creditors. Phone us for advice days before the hearing.
If a charging order is made by the court, then it
• If your home is worth less than your mortgage will only apply to your share of the property.
(also known as “negative equity”), then you
can argue it is not worth a charging order being
Charging Orders in the County Court
If your creditor is arguing they can charge interest
I ALREADY HAVE AN INSTALMENT after a county court judgment, we have a factsheet
ORDER AND AM NOT BEHIND that my be helpful, phone us for advice.
WHAT DOES A CHARGING ORDER
If you have kept up with instalments on a
county court judgment then the court should
not make a final charging order. According to A charging order may be made against any item in
a case called Mercantile Credit Co Ltd v Ellis in
which you have “an interest”. This usually
1987, a charging order should only be made if means property that you own (or part own) and
the payments on a judgment are in arrears or will usually be your home. If you own your home
you were ordered to pay the judgment in one in your sole name, then the house will be covered
lump sum immediately (forthwith) and didn’t by the final charging order. If you own your
pay. This case is very important. If you are in home in joint names with someone else then the
this situation and still have an interim charging charging order will cover your share or quot;beneficial
order made, you MUST go to the hearing and interest” in the property.
take evidence that you have kept up with the
instalments ordered and mention this case to
CAN THE CREDITOR SELL MY
the district judge. Phone us for advice.
DIVORCE AND SEPARATION It is rare for the court to allow a creditor who has
a final charging order to sell your home. Most
If you are currently involved in divorce
creditors are prepared to wait for you to sell your
proceedings, or a dispute over dividing up the
home at some point in the future and to be paid
former matrimonial home, then you must get
out of the proceeds of the sale. If a creditor is not
detailed legal advice from a solicitor. You may be
prepared to wait, then they can apply to the court
able to stop a charging order being made,
for a hearing for an order for sale. It is up to the
depending upon the stage in the divorce
court to decide whether to make an order for sale
INTEREST The court should take into account the factors
outlined above in the section “How can I stop a
If a creditor has taken the debt to the county court, charging order?”.
they may be able to add extra interest once a
charging order is made. Interest cannot be added The court can order a sale where:
• The debt is in your sole name and you are the
• the debt is for an agreement regulated by the sole owner.
Consumer Credit Act. This includes most or
ordinary credit agreements, including bank
overdrafts. • The debt is in both the names of the joint
or owners of the house.
• the debt is less than £5,000 in total, even if it is • If the debt is in your sole name and the house
not covered by the Consumer Credit Act. is in joint names, the creditor gets an quot;interestquot;
in the house once the charging order is made
• If the debt is more than £5,000 and not covered final. This means the creditor can apply to the
by the Consumer Credit Act, then interest is set court for an order for sale to realise their
by the court and runs at a standard rate. quot;interestquot; in your house. All joint owners (or a
married person who is not a joint owner but
has an quot;interestquot; in the property) should be
Charging Orders in the County Court
part of the court proceedings so they can Remember, it is very unusual for an order for sale
explain their case to the court as well. They to be made. If your creditor is threatening to have
should be sent a notice of the hearing and be your house sold, you will need specialised legal
allowed to attend. advice. Phone us for advice.
At the hearing the court must look at the
following: PAYING OFF A CHARGING ORDER
• Is there enough equity in the house to cover If you pay off the amount you owe under the
any mortgages and the charging order debt? charging order, you can apply to the court for the
order to be discharged. Ask the court for a
• When you bought the house what did you buy certificate of satisfaction on your county court
it for? Is it intended as a long-term family judgment and include evidence of payment. It is
home? Is it imagined that an elderly person usual for creditors to inform the Land Registry
will live there for their lifetime? that the interim and final charging order have been
• Welfare of any children should especially be
taken into account. Are there special factors For details of the District Land Registry that
such as age, disability or illness? There may covers your area contact:
be a need for stability at school. The effect on Land Registry Headquarters.
the children of moving house should be 32 Lincoln’s Inn Fields
• If the debt is in your sole name, argue that it is WC2A 3PH
not fair for the whole family to lose their home Tel No: 020 7917 8888
because of a debt belonging to one person. www.landreg.gov.uk
The court should look at whether the interests of You can also check details of charges on property
the creditors should outweigh the interests of the on the Land Registry website
family. Argue that, under The Trusts of Land & www.landregisteronline.gov.uk. The creditor may
Appointment of Trustees Act 1996, the court has say there is interest on the county court judgment
discretion to say the family's interests outweigh which is still outstanding. If the creditor disagrees
the creditor’s interests. that you have paid the charging order in full,
phone us for advice.
You can still make an offer of payment at this
stage and ask the court not to order a sale as long If you have enough equity in your home, you can
as you keep up with the payments. You can ask also pay off the charging order if you move house,
the court to adjourn the order for sale proceedings, as the charging order will automatically be paid
or to suspend the order. off as part of the sale process.
Charging Orders in the County Court