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New rules speed up the way creditors put credit card debts on people’s homes
Page last updated Wednesday, 10 April 2013
Changes in the way debts can be enforced, affecting all consumers with unsecured debts and who are house owners, have quietly slipped in under the radar.
From the 1st October 2012 an unsecured creditor such as credit or store card, personal loan, payday loan or even a catalogue company can now apply for a charging order on a debtor’s assets, usually the home, even in cases where the debtor is making the agreed payment under a County Court Judgement (CCJ).
The old method of applying for a charging order
Prior to October, creditors could only apply to secure a charging order on unsecured debts if they first issued a default notice, and would then need to apply for a CCJ and have to wait until the borrower missed a payment under the CCJ before they could apply to get the charging order.
Now, to apply for a charging order, all the creditor has to do is successfully secure a CCJ on the debt and at the same time submit an application for the charging order whereby they can then secure the debt on the house.
Cash-poor but asset-rich
Many creditors see this change in the law as closing a loophole that previously allowed a debtor who was ‘cash-poor’ in terms of income but ‘asset-rich’ in terms of owning a property to escape getting away with just offering small monthly payments to pay off large debts and then selling off their assets with not having any legal obligation to use any surplus proceeds of that sale to pay off any judgement debts.
Providing payments are being met through the instalment arrangement under the CCJ then there is no risk of the creditor being allowed to apply for an order for sale of the home. However, miss a payment and you are at risk of having what you thought was an unsecured credit card debt, being secured on your home, which could then lead to its forced sale. You have been warned.
How to avoid a charging order
If you are struggling to meet your debt commitments then it is imperative that you get free debt advice sooner rather than later.
One way to avoid a charging order is to include the creditor in your Individual Voluntary Arrangement, IVA, or Trust Deed if suitable, and once it has been approved then that creditor will be unable to apply to the court for a CCJ or charging order as they will be legally bound by the IVA.
So, it is essential that any consumer struggling to make their debt commitments seeks professional and free debt advice, with free debt solutions to get the best way to manage their debts and avoid any unnecessary charges on their home.
Where can I get free debt advice and debt solutions with no fees?
You can either telephone DebtWizard on 0800 197 8433 or click on the following link where you will get access to organisations that also include the debt charities.
Take me to free debt advice agencies.
Further reading, Mike's blog -
House owners be warned - There is now no such thing as unsecured debt!
John Don (Guest) Friday, 23 November 2012
What a disgrace these charging orders are and always have been. You ,the consumer, pay very high interest on unsecured credit because that is what it is supposed to be UNSECURED !!
If you cannot pay it should be the creditors loss but if you have assets ,usually your home, then oh no the creditor all of a sudden has in effect a secured loan by way of a charging order!!!
So much consumer law needs changing , and it is, FOR THE WORSE.
Unsecured debt should mean exactly that.
It was the same when we all hoped the 6 year limit on debt would become 3 years, no chance with this government.
David Murray (Guest) Thursday, 22 November 2012
There seems to be a dearth of information and advice to help those who are unemployed, snowed under with debt taken on in better times, who rent their home and have no money in the bank, no car/caravan/motorbike etc stood outside and have only social security benefits as their only source of income. As a former Councillor who used to advise people with personal problems, I used to advise them to tell their creditors to 'get stuffed.' For these people, the debt is not their problem it's their creditors. After receiving my advice, many people have told doorstep collectors and the agencies they worked for to bugger off - and laughed in their face as they did. While I appreciate that Mike and Debtwizard do a fairly good job bearing in mind the probable caseload, I think speedier action could be taken with the cases I have just described. I have known a debt collector, pursuing a young chap who came to live with me for a while, tell him to take no notice of me - "he is not helping you." This from a man who tried to frighten debtors by pretending that he was a former police officer (he was not.) So Mike, lets get the message across to these people - debt is your creditors problem - not yours. Get out there and enjoy life, it's not your problem.
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