If you are struggling to pay debt and you own your home one of the legal actions that your unsecured creditors can take is to apply for a charging order against your property. We explain whether you can protect your property by using an Individual Voluntary Arrangement (IVA).

Once one of your creditors has applied for a charging order a court Judge will decide whether or not it should be granted. If it is then the debt which was originally unsecured becomes secured against your home.

The result of this is that once you come to sell your home if you have not already paid the debt by that time it will then have to be paid in full out of the equity available in the property. If there is no equity and the debt cannot be paid then the creditor can block the sale. Charging orders can therefore cause significant problems for home owners.

An IVA will protect your property against charging orders

Once in place an IVA stops legal action being taken against you or your property. This means that if you are a home owner your creditors are not allowed to apply for charging orders against your home.

BMD Tip: As a home owner if you use this debt solution you will be required to release equity from your property if you are able to do so. However you remain in control and ultimately any unpaid debt at the end of the process is written off.

Will an IVA halt a charging order application?

If one of your creditors is already in the process of applying for a charging order it is not too late to take action to protect your home if you start an IVA.

Even if a court date has already been set for the charging order application to be heard it is still possible to prevent the hearing from happening at all by applying for an Interim Order. This is a court order which suspends any further court action being taken against you or your property to give time for the IVA to be put in place.

BMD Tip: An interim order can be put in place very quickly but even so if you know an application for a charging order is underway and especially if a date for the court hearing has been set you need to act quickly.

Do you want help to start an IVA? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts

Can an IVA help if a charging order is already in place?

If a charging order has been put in place it means the associated debt is now secured against your property. Once this has happened this debt can no longer be included in an IVA. A charging order is an extremely strong legal tool and there is very little you will be able to do about it other than pay the debt in full.

Having said that the Arrangement can still help if you have other unsecured debts. By using it to reduce the amount you are paying towards these other debts you can free up cash to allow you to make reasonable monthly payments towards the charging order debt and pay it as quickly as possible.

It is always in your best interests to pay the charging order debt as soon as possible as statutory interest will be added to it at the rate of 8 percent per year.

The IVA solution is sensible for home owners

Home owners are sometimes put off starting an IVA because of the fact that they have to agree to release equity from their property as part of the agreement.

However if your primary objective is to protect the equity in your property you will not necessarily achieve this by using a different debt management solution.

If you start a Debt Management Plan you are not obliged to release equity. However you get no legal protection from your creditors and they are not prevented from applying for charging orders against your home. If they decide to do so and are successful then the debts will eventually have to be paid in full from your equity when you sell your home if not before.