Some creditors may claim that simply by getting a Charging Order against your property they are then entitles to add interest to the debt that you owe. This is not correct. Whether or not interest can be added after a Charging Order has been issued will depend on the type of debt that you owe.
Before an application for a Charging Order is made the creditor must first apply for a CCJ (County Court Judgement) against you. As per the County Courts (Interest on Judgement Debts) Order 1991 once a CCJ is issued statutory interest cannot be added to this debt if one or both of the following applies:
– The debt is for an agreement regulated by the Consumer Credit Act. This includes most ordinary credit agreements including bank overdrafts and HP agreements.
– The debt is less than £5,000 in total even if it is not covered by the Consumer Credit Act.
Importantly if a charging order is subsequently applied for and granted by the Court it does not change this ruling.
As such if you have received a charging order for a debt which is covered by the consumer credit act such as a personal loan, credit or store card the creditor cannot add statutory interest after a charging order has been issued.
When can interest be charged to Charging Order debts?
Debts which are not covered by the Consumer Credit Act are called unregulated agreements. If a CCJ and then a Charging Order has been issued against your property for an unregulated agreement the creditor is allowed to continue adding statutory interest at 8% a year as long as the value of the CCJ debt was greater than £5000 at the time it was issued.
The most common unregulated agreements include:
– Credit Union debts
– Mortgage shortfall debts
– Personal debts to individuals
– Loans from an employer
How can I reduce the interest being added to my Charging Order?
If your Charging Order debt is based on an unregulated agreement and interest is being applied this can mean that the debt is growing faster than you can afford to repay it and the balance is actually increasing.
Where this is the case you can apply to the Court to vary the terms of the Charging Order so that the creditor is no longer allowed to add interest to the outstanding debt. You can do this at any time after the Order has been issued.
You will need to complete a special application form called an “Application for suspension of a warrant and/or variation of an order” known as form N245. You can download this form here:
Once you have completed your N245 form you will need to send it together with a fee of £35 to the court. You should also include a letter requesting that the creditor no longer be allowed to add interest to their debt as this means that the debt is increasing despite your best efforts to repay it.
The court will send the form and your letter to the creditor who will decide whether they will agree to your request. If they do not agree the court will look at the information you gave and make a decision.
If the decision goes against you and the Court decides not to suspend the interest being charged you can it ask it to ‘reconsider’ the order. You must write to the Court within 16 days explaining why you feel that the interest should be frozen. The court will arrange a private hearing for you and the claimant to discuss the matter with the district judge. If judgment was not made in your local court the case will automatically be transferred there before the hearing is arranged. You will be told when to come to court. You should go to this hearing.