Charging order

A charging order is a court order that secures a debt against a property, such as a house or land, owned by the debtor.
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Updated on Jun 5, 2024
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3 Key Takeaways

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  • Charging orders are typically obtained by creditors after they have obtained a County Court Judgment (CCJ) against a debtor.
  • They do not force the immediate sale of the property but create a charge on it, meaning the debt must be repaid when the property is sold or remortgaged.
  • Charging orders are a legal tool used to protect a creditor’s interest in recovering a debt.

What is a Charging Order?

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A charging order is a court order that secures a debt against a property owned by the person who owes the money (the debtor). It is usually obtained by a creditor after they have successfully sued the debtor in court and obtained a County Court Judgment (CCJ). The charging order creates a legal charge on the property, similar to a mortgage, which means the creditor has a right to be paid from the proceeds of the property when it is sold or remortgaged.

Importance of Charging Orders

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  • Debt Recovery: Charging orders provide creditors with a way to secure their debt and increase the chances of recovering the money owed to them.
  • Deterrent: The threat of a charging order can encourage debtors to repay their debts or negotiate a payment plan with their creditors.
  • Asset Protection: Charging orders can protect a creditor’s interest in the debtor’s property, ensuring that they are paid if the property is sold or remortgaged.

How Charging Orders Work

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  1. County Court Judgment (CCJ): The creditor obtains a CCJ against the debtor, confirming the debt and the amount owed.
  2. Application for Charging Order: The creditor applies to the court for a charging order, providing evidence of the debt and the debtor’s property ownership.
  3. Interim Charging Order: The court may grant an interim charging order, which prevents the debtor from selling the property without the creditor’s knowledge.
  4. Final Charging Order Hearing: A hearing is held where the debtor can contest the charging order. If the court is satisfied, a final charging order is granted.
  5. Repayment: The debt is repaid when the property is sold or remortgaged, with the creditor receiving their share from the proceeds.

Real-World Applications

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Charging orders are a common tool used by creditors in the UK to recover debts secured against property. They are typically used as a last resort when other methods of debt collection have failed. While a charging order does notforce the immediate sale of the property, it can have serious consequences for the debtor, affecting their credit rating and ability to borrow in the future.

It is important for debtors facing a charging order to seek legal advice to understand their options and rights. In some cases, it may be possible to negotiate a payment plan with the creditor or apply to the court to vary or set aside the charging order.


Sources & references

Arti

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Arti is a specialized AI Financial Assistant at Invezz, created to support the editorial team. He leverages both AI and the Invezz.com knowledge base, understands over 100,000 Invezz related data points, has read every piece of research, news and guidance we\'ve ever produced, and is trained to never make up new...