This fact sheet covers England & Wales. You will need different advice if you live in Scotland.
This fact sheet tells you how a creditor can apply for a charging order against your home or any other property you have a part share in. This can only happen if the creditor has already got a county court judgment (CCJ) for your debt. A charging order is a court order which secures the debt against your home like a mortgage. If a creditor is taking action against you in the High Court, contact us for advice.
Use this fact sheet to:
- find out when and how your creditor can apply for a charging order;
- work out if you can stop a charging order from being made; and
- find out how and when a creditor can apply to sell your home.
County court judgments (CCJs)
My CCJ was applied for before 1 October 2012
In this situation, the creditor can apply for a charging order if they have a CCJ against you and:
- you have been ordered to pay the whole debt immediately, or by a certain date, (this is known as a ‘forthwith’ judgment) and you have not done so; or
- the court has ordered you to pay the judgment by instalments and you have missed one or more payments.
If you have been ordered to pay a CCJ by instalments that you cannot afford, you may be able to ask the court to look at their decision about the rate of payment again.
If you apply to the court to vary the instalments of a judgment made before 1 October 2012 after this date, the creditor may argue that they can apply for a charging order. There are legal arguments against this. Contact us for advice.
My CCJ was made on or after 1 October 2012
In this situation, changes to the law mean that the creditor can apply for a charging order even if the court ordered you to pay the CCJ by instalments and you are up to date with them.
Paying the debt by instalments
If you have been ordered to pay the debt by instalments and are not behind on the payments, the court should not make a charging order. This is because of a very important case called Mercantile Credit Co Ltd v Ellis in 1987. See the later section on Instalment orders for more information.
Charging order process
The application for a charging order process changed on 6 April 2016. This fact sheet explains the new rules. There are two stages.
Stage one – the interim order
When the creditor makes an application for a charging order, the court will make an ‘interim charging order’ if it is satisfied that you own, or have a part share (an interest) in the property. This is not the final order.
An interim charging order is usually made without a hearing, by a court officer. You can object in some circumstances but only have 14 days to do so. You would need to show a legal reason why the charge should not have been made, contact us for advice.
The application will be referred to a judge if:
- you are up to date with an instalment order that was made before 1 October 2012; or
- the court officer thinks there is a reason why the application should be considered by a judge.
If the decision is made by a court officer, your creditor will have to send you a copy of the interim order within 21 days of the order being made.
If the decision is made by a judge, they can either:
- refuse to make an interim order charging order;
- make an interim charging order; or
- make an interim charging order and set a hearing date at your local county court hearing centre. At the hearing the judge will consider whether to make a final charging order. See Stage two – the final charging order.
The creditor will register the interim charging order as a ‘notice’ or ‘restriction’ on your property with the Land Registry, which should inform you of this in writing. This means that the creditor can stop you from selling the property until the court has decided whether to make a final charging order. If the creditor has not followed these steps, they may not be able to carry on with their charging order application. Contact us for advice.
The creditor has to pay a fee to the court for a charging order application. The creditor will add this to your debt. They can also add other court costs to the debt.
Stage two – the final charging order
Once you have been served with a notice that an interim charging order has been made, you have 28 days to object to a final charging order. You must send your objections in writing to both the court and the creditor. There will be a hearing at your local county court hearing centre, and a judge will decide whether to make the final charging order.
If you do not send any objections, a judge will decide whether the charging order can be made final without a hearing.
If a judge has already arranged a hearing after making a decision about the interim charging order, you must send any objections you have to both the court and the creditor at least 7 days before the hearing.
You should go to the hearing. If you cannot attend on that date, explain this to the court and ask for a different hearing date. If you do not attend the hearing, the court is likely to make the order final.
You should send your objections to both the creditor and the court. This could be in the form of a letter outlining all the arguments you have against the charging order being made. This should be sent by recorded delivery to both the creditor and the court. Include a copy of your budget, so the court is aware of your current financial circumstances.
You can find most court forms using the court form finder on the HM Courts and Tribunals Service website http://www.justice.gov.uk/about/hmcts. You can fill in application forms online and print them off to sign and send to the court.
Can I stop a final charging order?
The court must consider whether it is reasonable to make a final charging order. Under the Charging Orders Act 1979, the court has to consider all the circumstances of the case and in particular:
- the circumstances of the person owing the debt; and
- whether any creditor would be ‘unduly prejudiced’. This means the court has to decide if making a charging order would disadvantage other creditors.
- your creditor applied for the CCJ on or after 1 October 2012;
- the court ordered you to pay the debt in instalments; and
- you are up to date with the instalments;
the court must take this into account when considering whether to make the charging order final. This means that you can argue that it would be unfair for the court to allow the creditor to get a final charging order, if you have not defaulted on any instalments that the court set on the CCJ. However, under the law, the court does not have to accept this argument and can still choose to make the charging order final.
The other arguments you can use against the order being made final will vary, depending on:
- your own circumstances;
- whether you have any other debts;
- whether you have ‘equity’ in your house; and
- whether you own your home in joint names or on your own.
'Equity' means the profit you would have left if you sold your home and paid off your mortgage and secured loans.
Depending on the circumstances of your case, these are some of the factors that the court may consider.
- Does any member of your family have a disability or serious illness?
- How many debts do you have?
- Will making a charging order in favour of one creditor give them unfair priority over the other unsecured debts? It can be helpful if you can show that the creditor that has taken court action against you has acted in such a way that it would be unfair to your other creditors.
- Sometimes it can be helpful to point out if you already have payment arrangements in place with your other creditors, and that a final charging order would upset these. It can also be worth highlighting if any of your other debts are larger than this one, and if any other creditors have frozen the interest. In practice, the court will often not take these things into account.
- Your creditor is supposed to list all the other creditors that they are aware of in their application for an interim charging order. The judge can direct the interim order to be sent to the other known creditors, but they do not have to do this. If creditors who may want to object to the final charging order do not receive a copy of the interim order, they will not know about the hearing. If you think that a creditor may be ‘unduly prejudiced’ by the charging order being made final, you can raise this in your written objections and at the hearing.
- Could the creditor have given you a secured loan when you first took out the loan? If they decided to offer an unsecured loan at a higher rate of interest instead, point out that other unsecured creditors may be disadvantaged by a charging order being made. It may be unreasonable to allow the creditor to secure the debt where a large part of the amount owed is interest and the interest rate that has been charged is typical of an unsecured loan.
- If you are likely to be made bankrupt, you can argue that a charging order would give the creditor an unfair advantage over other unsecured creditors. Contact us for advice.
- There are other ways the court could enforce payment of the debt. You could ask the court to make an instalment order so that you make monthly payments you can afford; or you could ask for an attachment of earnings order so that the instalments would come directly from your wages. This is only useful if you are employed and your employment would not be at risk.
Our self-help pack includes further information on types of debt and guidance on completing a budget. Contact us for a copy.
More ways of trying to stop a final charging order
- If you owe less than £5,000 in total to all your creditors, you can argue that the debt should be included in an administration order rather than the charging order being made final.
- If your home is jointly-owned and your share of the equity in the property is less than the amount of the debt, you can argue that there is no point in the charging order being made. This is because the creditor would not be paid off in full, even if they forced the sale of your home. This is a complicated area. Contact us for advice.
- If your home is worth less than your mortgage (also known as negative equity), you can argue that there is no point in a charging order being made. This is because the creditor would not be paid off, even if they forced the sale of your home.
- If the debt is very small compared to the amount of equity in your home, you may be able to argue that it is unfair to make a charging order. However, the court may not accept this argument.
- If your debt is small and you have been paying the CCJ as the court ordered, argue that it is unfair to make a charging order. This only applies to CCJs applied for by creditors on or after 1 October 2012.
In practice, it can be very difficult to persuade the court not to make the charging order final.
If the court decides not to make the charging order, you will still have to pay the debt. Keep up to date with any instalments the court has ordered you to pay. This will stop your creditor from using other kinds of enforcement.
Final charging orders
If none of your arguments are successful and the court makes a final charging order, you can ask the court to add conditions to the charging order. Conditions can prevent the creditor from applying to sell your home in certain circumstances. For example, you can ask the court not to allow your home to be sold as long as you have children in full time education who live there.
You could also ask the court to suspend enforcement of the charging order as long as you make certain payments. This will be useful if you previously fallen behind on the payments the court has ordered you to make. If the court agrees to this request, it means that the creditor cannot apply for your property to be sold as long as you keep to the agreed payments.
Once a creditor has a charging order against your home, they could still try to enforce the debt in other ways. Therefore, it is a good idea to apply for the CCJ to be varied to allow you to pay an affordable amount each month. See our Varying a judgment fact sheet for more information..
If your application is successful and you keep the new payments that are ordered, the creditor will not be able to enforce the debt in other ways. Contact us for advice.
If you want the court to add conditions to the charging order, or to suspend it on terms of payment, you can ask for this using the procedure for making objections against the order being made final. This means sending the court and creditor written details of your request at least seven days before the hearing. Contact us for advice.
The house is in joint names but the debt is in my name
If the debt is in your sole name, but you own the house in joint names with someone else, they have the right to tell the court about their circumstances and why they will suffer hardship if a charging order is made final. They should have been sent a copy of the interim charging order. They should send their objections in writing to the court and creditor by recorded delivery at least seven days before the hearing. They should be given an opportunity to go to the hearing and explain their objections. If they paid part or all of the deposit to buy the home, or have paid a lot of the mortgage payments, they can explain this to the court. Contact us for advice.
My creditor applied for the CCJ before 1 October 2012
In these circumstances, if you have kept up with instalments on a CCJ, the court should not make a final charging order. According to a case called Mercantile Credit Co Ltd v Ellis in 1987, a charging order should only be made if the payments on a judgment are in arrears, or if you were ordered to pay the judgment in one lump sum ‘forthwith’ (immediately) and didn’t pay. This case is very important. If you are in this situation and still have an interim charging order made, go to the hearing and take evidence that you have kept up with the instalments ordered on the CCJ. Mention the Mercantile Credit Co Ltd v Ellis case to the District Judge.
My creditor applied for the CCJ after 1 October 2012
The law changed on 1 October 2012. If a creditor applies for a CCJ against you after this date, the creditor can get a charging order even if you are up to date with the instalments the court ordered you to pay.
Divorce or separation
If you are currently involved in divorce proceedings, or a dispute over dividing up your former marital home, you must get legal advice from a solicitor. You may be able to stop a charging order being made, depending upon the stage in the divorce proceedings.
If a creditor has got a CCJ against you, they may be able to add extra interest once a charging order is made.
- For some types of debt, the law allows interest to be added onto CCJs separately from the terms and conditions of the agreement. This is known as ‘statutory interest’ and it runs at a standard rate.
- For some debts, there is a clause in the agreement which allows further interest to be added to the debt after the creditor has got a CCJ. This is known as ‘contractual interest’.
Statutory interest cannot be added to a CCJ if:
- the debt is for an agreement regulated by the Consumer Credit Act (most ordinary credit agreements, including bank overdrafts); or
- the debt is less than £5,000 in total, even if it is not covered by the Consumer Credit Act.
- an agreement allows contractual interest to be added after a CCJ is made; and
- the CCJ was made on or after 1 October 2008;
the creditor has to follow certain steps, such as sending you a proper notice, before the contractual interest can be added. Contractual interest builds up separately to the judgment and will not be secured by the charging order. Contact us for advice.
Judgments made before 1 October 2008
The rules about contractual interest and CCJs made before 1 October 2008 are more complicated. Contact us for advice.
What does a charging order affect?
A charging order may be made against any item in which you have an ‘interest’. This usually means property that you own (or part own) and will usually be your home.
If you own your home in your sole name, then the charging order will be made against the whole property. This is sometimes called a ‘notice’.
If you own your home in joint names with someone else and the debt is in your sole name, the charging order will be made against your share or ‘beneficial interest’ in the property. This is sometimes called a ‘restriction’. When the property is sold, the debt should only be paid out of your share of the equity.
Selling my home
If your creditor applied for your CCJ before 1 October 2012, they can apply to the court for permission to sell your home, called an order for sale, if:
- a charging order has been made final; and
- you have not met the terms or conditions that the judge added to the order.
If your creditor applied for the CCJ on or after 1 October 2012, these rules still apply. However, there is an extra rule that may help you. Your creditor cannot apply for an order for sale unless you have missed payments that the court ordered you to pay on the CCJ.
Most creditors are prepared to wait for you to sell your home until some point in the future, and to be paid out of the proceeds of the sale. If a creditor does make an order for sale application, a hearing will be arranged and the court has the final decision about whether the order should be granted.
You will need to get some help and representation to prepare for an order for sale hearing and to put forward your case at court. We can help you to find the right type of help. Contact us for advice.
At the hearing, the judge will consider your circumstances before making a decision about whether to grant the order for sale. They should take into account the following points.
- The size of the debt.
- The level of equity in the property. If there is not enough equity for the debt to be repaid when the property is sold, the court is unlikely to allow the property to be sold.
- Your approach to the debt. If you have not attempted to come to an arrangement with the creditor to repay what you owe, the court is more likely to grant the order for sale.
- If you can repay the debt in a reasonable time, the court is unlikely to allow the property to be sold.
- The welfare of any children in the household. For example, there may be a need for stability at school. The effect on the children of moving house should be considered.
- The effect the sale of the property would have on any other family members living in the property.
- The interests of any secured creditor.
- When you bought the house, what did you buy it for? Was it intended as a long-term family home? Was it imagined that an elderly person would live there for their lifetime?
The court has the power to suspend an order for sale as long as you meet certain conditions, such as making regular affordable payments based on your budget, or until the youngest child living in the property reaches 18.
If you do not live in the property as your main home, it is likely to be much harder to argue against an order for sale. If you rent the property out, for example, the court may be more likely to grant the order for sale.
On or after 1 October 2012
If the creditor applied for your CCJ on or after 1 October 2012 and you are up to date with the instalments that the court ordered you to pay, the court should not grant an order for sale.
From 6 April 2013
From 6 April 2013, the court should not make an order for sale if:
- your original debt was regulated by the Consumer Credit Act 1974; and
- your creditor applied for the order for sale when the amount owing under your CCJ was less than £1,000.
Properties in joint names
If the debt is in your sole name, you can argue that it is not fair for the whole family to lose their home because of a debt belonging to one person. You can also point out any other special household circumstances, such as age, illness or disability.
If your share of the equity is less than the amount of the debt, the court may be less likely to grant the order for sale.
If the property is in your sole name, but someone else has made significant contributions to the purchase price or ongoing bills, they may have gained a 'beneficial interest' in the property. This means that they have got a legal right to the share of the equity, even though they are not a named joint owner. If this can be proven, the extra protection given to jointly-owned situations will apply. This is a complicated area. Contact us for advice.
What can I ask the court to do?
You can still make an offer of payment at this stage and ask the court not to order a sale as long as you keep up with the payments. Use your budget to work out what you can afford to pay towards this debt, taking into account any other debts you have. Contact us for advice.
What if the court makes an order for sale?
If the court makes an order for sale, you will usually be given 28 days to clear the debt or move out of the property. If you do not leave the property within the time the court states, the creditor can apply for a warrant of possession. A warrant of possession gives you a time and date when bailiffs will evict you. If you are in this situation, contact us for advice.
Is there a time limit for a creditor to apply for an order for sale?
An important court case called Yorkshire Bank Finance Limited v Mulhall from 2008 decided that, once a creditor has a charging order against you, there is no time limit within which they must apply for an order for sale. This means that a creditor could ask the court for your property to be sold years after the charging order was originally made.
Paying off a charging order
If you pay off the amount you owe under the charging order, you can apply to the court for the order to be discharged. The amount you have to pay will include court fees and costs that have been added to the debt. Ask the court for a certificate of satisfaction on your CCJ and include evidence of payment. Creditors will usually inform the Land Registry that the debt has been paid so that the charging order can be removed from your property.
If you have enough equity in your home and you move house, the charging order will usually be paid off as part of the sale process. If you own the property jointly with someone else, but the CCJ is in your sole name, this may not happen automatically. Contact us for advice.
A creditor says you have not paid off the charging order
The creditor may say there is interest outstanding on a CCJ. If the creditor disagrees that you have paid the charging order in full, contact us for advice.
The Land Registry
You can check details of charges on property online through the Land Registry website. The Land Registry can also be contacted using the following details.
Land Registry Phone: 0844 892 1111 Email: firstname.lastname@example.org