Credit Repair- Charging Orders In the County Court
Below is a MRR and PLR article in category Finance -> subcategory Other.
Credit Repair: Understanding Charging Orders in County Court
Overview
Charging orders are legal tools creditors use to secure a money judgment, compelling debtors to repay what they owe. This guide explores how charging orders work, the court procedures involved, and your options if a charging order is filed against you.
What is a Charging Order?
A charging order is a court-filed instrument that acts as security for a debt, much like a mortgage does for a property. Before issuing a charging order, a court hearing must occur. Understanding your options is crucial if you believe a charging order may be filed against you.
When Can a Creditor Request a Charging Order?
Creditors can pursue a charging order in two scenarios:
1. County Court Judgment: If you have a county court judgment requiring immediate payment (forthwith judgment) and fail to pay, creditors can seek a charging order.
2. Instalment Default: If you default on court-ordered instalment payments, creditors can file for a charging order. However, if you’re up to date with payments, the court cannot issue a charging order, as established in the 1997 Mercantile Credit Co Ltd vs. Ellis case.
Charging Order Application Procedure
Interim Charging Order
Initially, the court verifies your interest in the property targeted by the charging order and issues an interim order. This order may be granted without a hearing, and a full hearing follows approximately 21 days later to determine if it should become final.
A copy of the interim order is filed with the Land Registry, preventing the property’s sale before the hearing. You’ll receive written notice of this.
Final Charging Order
During a hearing with the District Judge, you can object to the final order. Written objections, with evidence, must be sent to the court and creditor at least seven days prior. Attendance at the hearing is vital, even if objections are submitted in writing.
If you cannot attend the hearing at the designated location, you can request a transfer to a local court using an N244 application form.
How to Prevent a Charging Order
The court considers several factors under The Charging Orders Act of 1979 before issuing a final order:
1. Personal Situation: Present your overall financial situation, including existing debts and mortgage details. Demonstrating existing payment plans with other creditors can strengthen your case for preventing a charging order.
2. Loan Nature: Differentiating between secured and unsecured loans may influence the court's decision.
3. Payment Alternatives: You can request an instalment order for manageable payments. Propose direct salary deductions if employed and feasible without jeopardizing your job.
4. Consumer Credit Act: If the debt falls under this act, applying for a Time Order could be more advantageous, altering your payment schedule.
5. Administration Order: Suitable if total debts are under £5,000, allowing you to propose alternative payment solutions to the court.
6. Impact on Family and Property: Highlight negative equity or the potential harm to family members, especially if the property is jointly owned and sale could prejudice their rights.
Special Circumstances
- Serious Illness or Disability: Consider arguing potential impact on family members needing special care.
- Single Debt, Jointly Owned Home: Discuss joint ownership during hearings; co-owners should file objections too. If issued, a charging order applies only to your share.
- Existing Instalment Orders: Refer to the Mercantile Credit Co Ltd vs. Ellis case if you're current on payments and facing a charging order.
- Divorce Proceedings: Seek legal advice during divorce to avoid prejudicing property division.
Interest on Debt
Creditors can claim extra interest when applying for a charging order in the county court, except:
1. For debts under the Consumer Credit Act (e.g., credit agreements, overdrafts).
2. For debts totaling £5,000 or less.
Interest rules vary based on court decisions and creditor arguments.
Understanding these steps and legal facets can help you navigate the complexities of charging orders and protect your financial interests.
You can find the original non-AI version of this article here: Credit Repair- Charging Orders In the County Court.
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