If you are a home owner and a County Court Judgement (CCJ) is issued against you then since October 2012 the creditor can then immediately apply for a Charging Order against your property whether you are making payments towards the debt or not.
If the court agree to this (which they normally will) then the debt becomes secured against your property with a legal charge called a Charging Order. However once such an Order is issued this does not mean that the creditor can automatically force you to sell your property. They first have to apply again to the court for an Order For Sale.
After the change to the law on the 5th April 2013 the debt now has to be more than £1000 before the Court will even consider this.
Why has the new charging order rule been introduced?
Prior to the change in the law, any creditor who had been awarded a Charging Order against a property could then apply to the court for an Order For Sale. If the court then granted the order the property would have to be sold to realise any equity so that the charging order was paid in full.
Many people believed that such action was too heavy handed particularly where smaller debts were concerned. It was not reasonable for example for a creditor who was owed just a few hundred pounds to ultimately petition the court to force the sale of a property to recover the debt.
However demands for a higher limit of £5000 or even £25000 before an order for sale could be applied for seem to have been ignored by the government.
As such many will still argue that the lower limit of £1000 before an order for sale can be applied for remains too low as if a creditor applies to force the sale of a house where a debt is only £2000 – £3000 this is still arguably heavy handed.
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Which debts are covered by the new charging order rule?
It is important to understand that the new rules only cover debts regulated by the Consumer Credit Act 1974. The majority of bank loans, credit cards, catalogue and store card debts are regulated by this act and so would be covered.
However there are many debts which are not regulated by the Consumer Credit Act. These include personal debts to individuals, debts owed to HMRC such as tax arrears and utility company debts.
These types of debt can still therefore be enforced with an application for an Order for Sale even if they are for a total sum less than £1000.
Implications of the new charging order rules
So what affect will this change to the charging order rules really make? My view is that in reality the change will have very little affect.
Currently very few banks who are granted charging orders then go on to enforce them by applying for orders for sale. A commercial bank is really interested in the increased protection that a charging order brings. They then know that the debt will eventually be repaid once the property is sold. They will not then push for a property to be force sold as generally there is no need.
It is far more likely for a non commercial banking creditor such as a personal creditor to apply for an order for sale. Very often because they want to cause as many problems as possible for the person who owes them money. However as these debts are not covered by the consumer credit act, they are not covered by the change to the rules.
In fact I think including these types of debt would have made more of an impact and afforded better protection for individuals.
In my opinion it would also have made more sense to increase the threshold for Order for Sale applications to a higher level of debt, perhaps £5000 or even £10,000. This would have given the individual far more protection against having to fight for their home over more trivial debts.
Of course it is still up the court to decide whether an application for an Order for Sale is reasonable. Generally speaking the court does not like granting such an application especially where the property in question is a family home. As such I feel that this recent change is likely to have very little affect on the number of Orders of Sale which are actually issued by the courts.
