A County Court Judgement (CCJ) is a court order requiring you to pay the debt that you owe. Once in place the credit reference agencies will register it against your credit file for six years. This will make it more difficult for you to borrow money in the future.
In addition if you are a home owner there could be more serious consequences. If they choose to the creditor can then apply for a Charging Order against your property which will have the affect of securing the debt against your home.
BMD Tip: Since this article was written creditors are now allowed to apply for a charging order as soon as a CCJ is granted whether or not you are maintaining payments towards the debt. This is a very important development as it increases the risk of previously unsecured debts being secured against your home.
What are the affects of getting a Charging Order?
If you are a home owner it is becoming increasingly common for creditors who have issued a CCJ to then apply for a Charging Order especially if they feel you will not respect the payment terms of the Judgement or it will take you a very long time to repay the debt.
The fact that the Charging Order is issued secures the unpaid debt against your property and gives the creditor more security that it will eventually be repaid.
In reality that fact that this type of Order has been issued will actually have a minimal effect until you come to sell your house. However if and when you choose to sell the property the outstanding debt would have to be paid from the sale proceeds before any outstanding equity is given back to you.
BMD Tip: If the debt that you owe is not regulated by the Consumer Credit Act there is a risk that interest can be added even after a Charging Order is issued. Where this happens it is in your interest to try and repay the debt as quickly as possible and not wait until you decide to sell your property.
Does a Charging Order mean I will be forced to sell my home?
The fact that a Charging Order has been issued against your property does not mean that the creditor can then force you to sell your home to get their money. To achieve this the creditor would have to apply to the Court for an Order for Sale.
The courts currently seem ready to grant charging orders because they feel it is right to offer the creditor protection against the possibility of you carrying out an Individual Voluntary Arrangement (IVA) or declaring yourself Bankrupt.
However it is very unlikely that a Judge will then agree to issuing an Order for Sale particularly if the property is your residential or family home or is in negative equity.
For this reason although they might threaten it, creditors generally do not take this further action and their aim is simply to protect themselves against the possibility of you becoming formally insolvent.
