Repairing Credit—County Court Charging Orders

 Repairing Credit—County Court Charging Orders

A charging order is defined here.

A creditor can get a monetary decision requiring the debtor to pay back what he owes by filing a charging order with the court.

The debt is immediately protected upon filing of a charging order. Put another way, it serves as a "security" for the debt, similar to how a mortgage secures a home or piece of land.

The issuance of a charge order is contingent upon the completion of a court hearing. Avoiding the issuance of a charging order is possible in multiple ways.

If your creditors have sued you in High Court and now want to know how to go about serving you with a charging order, this report will walk you through the process. It also describes how charging orders work in country courts. If you are uncertain about what to do after suspecting the filing of a charge order against you, this report will provide guidance.


In some situations, a creditor may seek a charging order from the courts.

A creditor may ask the court to impose a charging order in two different situations. An example of this would be a "forthwith" ruling, in which the court orders you to pay the debt immediately after it has been decided against you in a county court. This means that the full amount of the debt needs to be paid immediately or by a specific date that the court sets.

If you have already been found guilty of a debt and ordered to pay it back in installments but have failed to do so, this is another scenario to consider.

A charge order cannot be issued by the court if you are already making all of your court-ordered installment payments on time. The ruling in the seminal case of Mercantile Credit Co Ltd v. Ellis, which dealt with debt payments and charge orders, in 1997 forms the basis for this.


APPLICATION PROCEDURE FOR CHARGING ORDER

The process of requesting a charging order consists of two steps:

STEP ONE: THE INTERIM CHARGEABLE ORDER

The court must first determine that you own or have a stake in the property at issue whenever a creditor seeks to issue a charging order against you. The court will issue an interim charging order after this fact has been determined.

The charging order itself is NOT this document. Even in the absence of a hearing, the court can issue this order and have a copy given to you. Following the issuance of the interim order, a date is scheduled for a full hearing.

The District Judge will have about 21 days to decide whether the interim charging order should be finalized or made permanent. At that point, a hearing can be scheduled. The district judge's private chambers are the usual location for this hearing.

In addition to this, the Land Registry will receive a duplicate of the interim charging order that is pending your case. Put this as a "caution" on your property so you can't get rid of it before the hearing. You will also receive written notification of this "caution" from the Land Registry.


Step 2: The Finalization of the Charging Order

The next step is to schedule a hearing with the District Judge, who will then have the responsibility of deciding whether the property in issue should have the interim charging order made final. Another name for this is the final charging order. Please ensure that any written objections to the final charge order are submitted to the court and the creditor no later than 7 days prior to the hearing.

To prevent a final charge order from being issued against you and your property, you must submit an objection letter by registered mail that explains all of your arguments and provides proof of your case.


To have your explanation considered at the District Judge-presided hearing, you must first send a letter of objection to the creditor and the courts. Even if you have objected in writing, you are still required to be present at the hearing. If you have not provided any written proof whatsoever, your presence is even more crucial.

You must notify the court of your intention to attend the hearing so that they can exercise their discretion and decide not to issue the charging order. If you find the scheduled hearing date to be inconvenient, it is imperative that you promptly notify the court in order to reschedule it. If you don't show up to the hearing, the court can side with the creditor and make the charging order permanent, which could hurt your case.

Your right to request a hearing in a court within your area is unaffected if you are unable to attend a hearing because it has been filed in another court. If you need to switch jobs, you'll need to complete out a N244 application, which costs money and lets you explain why you're doing it (e.g., because of the long commute, the distance, or the expense of daycare).


PROCESSING A CHARGING ORDER WITHOUT COMPLETION

The decision to issue the charging order rests with the court. Before reaching a verdict, the court must take into account a number of factors outlined in the Charging Orders Act of 1979. Here are some of the conditions:

1.) The private circumstances of the "debtor"

Any other creditors whose rights might be violated by a charging order must be considered by the court. Therefore, before making a decision, the court will need to consider your individual circumstances, including any other debts you may have, your mortgage, the amount of equity in your home, and whether you own the home alone or with a partner.

Assuming you have multiple creditors and a large amount of debt, it would be unfair to provide a charging order to one of them. You can avoid the charging order's release by providing proof that you have a payment plan with your other creditors.

A rundown of your debts, with amounts due and whether or if any creditors have withheld interest charges, would be helpful.

The creditor is also required to give a list of all other creditors that they are aware of when they file a charging order.

It is not mandatory that the court provide creditors with a copy of the interim order; nonetheless, it may be done so to allow them an opportunity to object to its issue during the hearing. This implies that the hearing for the interim order is probably not going to be public knowledge to your other creditors. In your written objections, you are also allowed to raise the possibility that one or more of them may be "unduly prejudiced" by the charging order.

As an additional argument, loan collateral can be presented. The rights of your other unsecured creditors in the event of a charge order can be affected by whether your creditor extended a secured or unsecured loan to you.

An instalment order, which allows you to pay the debt in manageable monthly installments, can also be requested from the court. The court can also impose this as a method of paying off the debt. Assuming your job security is not jeopardized, you can ask the court to deduct the payments from your paycheck if you're working.

Take a look at your debts and see if any of them fall under the Consumer Credit Act. You can use this as evidence to request a Time Order instead of a charging order, which might work out better for you. If you want to extend the payment time or change the monthly payment plan, the court might look at this.

An administrative order, rather than a charging order, could be part of your case. If your total debts to all of your creditors do not exceed £5,000.00, then this will apply.

In the event that bankruptcy is imminent, it is important to emphasize that a charging order would only secure payment for one creditor, which will negatively impact your other creditors.

One more way to fight against a charge order from a creditor is to put a condition on your mortgage. If your home's value is lower than your mortgage, meaning that no amount of money could be collected from its sale or auction to pay off your obligation, this is especially important to keep in mind.

However, this may work against you in court if your debt is very little in comparison to your home's equity or market worth.

Highlight the potential stress on your loved ones that could result from having to sell your property to settle your debt. Even if the debt is in your name alone, a charging order would affect everyone in your household because you and your spouse own the house jointly.

2.) Significant health problems or impairments within the family

If you or a member of your immediate family is terminally sick or in need of specialized medical care, you should tell the court that selling your house to settle your debts will violate the rights of these people.

It is possible that the court may decide to issue a final charging order even though all of your arguments fail to uncover any grounds. As long as you pay off the debt in regular installments, you can still ask the court to keep your residence. If the court does not consider your request during the hearing, you can apply for a N245 loan to pay off your debt in installments.


Jointly Owned Home, Singular Debt

If you and another person own your house jointly, but you have a debt in your own name alone, there are ways to make it work to your benefit. Both your written argument and your oral argument should make this point clear. To ensure that your home's co-owner has an opportunity to voice their concerns during the hearing, it is necessary to provide them with a copy of the interim order as well. The following are examples of potential factors to be examined:

1.) Ascertaining the identity of the homebuyer who made the initial investment
2.) Determining the identity of the mortgage payment maker
The presence of minor children - you have the option to ask the court to change the charging order so that the house can't be sold until the kids are adults.

To strengthen your case, it is recommended that your home's co-owner submit their written objections to the court at least seven days before to the hearing date.

Your portion of the property is the only one that a charge order, should the court decide to issue one, can be enforced against.


IN THE EVENT THAT YOU HAVE NOT BEEN DEFAULT AND THERE IS A PREVIOUS INSTALLATION ORDER

It was determined in the 1987 seminal case of Mercantile Credit Co Ltd vs. Ellis that the court should not issue a charge order if the debtor makes all of his monthly instalments on time and never misses a payment. If the debtor has already been ordered by the court to pay in monthly installments or the entire sum in a "forthwith" ruling and still hasn't done so, then a charging order should be issued. Make sure to mention this historic instance at your hearing if you are currently in compliance with an instalment order and have not missed any payments.


Ending a marriage

A smart idea is to see a solicitor for legal guidance when you are in the midst of divorce proceedings, as they may involve split of the home or property. The ability to prevent the charge order from being issued depends on the current status of your divorce procedures.


INTEREST

If a creditor files a charge order claim with the county court, he might really incorporate additional interest for the debt. On the other hand, the following criteria prevent the addition of interest:

1.) The Consumer Credit Act has served to secure the debt. Overdraft fees and standard credit agreements are examples of this form of debt.
2.) Total debt amounts to just £5,000—and that's without considering any coverage under the Consumer Credit Act.

The court may use the regular rate to determine interest if neither of the aforementioned conditions is satisfied and the amount exceeds £5,000.

Creditors may have to wait for the county court to make a final decision before they can charge interest, based on their reasons.

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