What is an Interim Charging Order

On July 9, 2011, in News, by Lewis Alexander

What are Interim Charging Orders, can anyone STOP an Interim Charging Order being placed against a house, home or property?

  • free credit report UK from ExperianWith changing times, come changing practices and the world of money lending is no different.
  • Here, the specific practice of placing an Interim Charging Order on a home is becoming increasingly common.

In order to answer whether charging orders are a necessary evil or a little over the top, we first need to explore exactly what a charging order is, when a charging order is applied for and what interim charging orders actually mean for the person impacted by the order.

  • So what are charging orders?

Well, put simply an interim charging order comes about when a money lender / creditor has a customer that has defaulted on their debt and in order to ensure that they (the creditor) gets repaid, they apply to the court for a charging order against the customer’s / debtors home, meaning that when and if the home is sold, any spare equity (after the mortgage on the property is repaid in full) is used to pay off the money claimed on the interim charging order.

In fact, charging orders are a way for lenders to protect themselves against customers failing to honour defaulted accounts, instead of simply selling the debt off to debt collection agencies at much reduced rates.  For example, large lenders will often sell debt.  Meaning that if you had a 10p in the £pound sell off, if a customer owed £1000, the lender would receive £100 from the debt collection agency that would now effectively own the debt.

This obviously results in a large loss and more recently has been accompanied by considerable negative publicity, owing to the sometimes ‘law stretching’ techniques that debt collection agencies, creditors and their respective solicitors employ.

  • So, the switch to looking to secure a charging order is seen to be both loss-limiting and more ‘customer friendly’.
  • Whether this is in fact true is a matter for great debate!

Charging orders should only be applied for when the customer has in effect stopped making repayments, has not contacted the lender to let them know of any change in circumstance and so has become an ‘absentee debtor’ i.e. they are not contactable.  At this point, it is acceptable for a lender to apply to the court to secure a charge over a debtors’ property. If you are not a home owner, a creditor cannot apply to have a charging order placed against a home you may be renting off of another person or authority.

However, in practice there are increasing numbers of cases up and down the country that are seeing charging orders applied for when customers have just started to experience difficulties with making their repayments.  In some cases, customers have made reasonable offers to continue with repayments which are rejected by the lender, who continue with applications for charging orders.

A charging order can only be applied for once a court order or CCJ is in place, one comes after the other and it is the pro active approach to forcing CCJ’s or county court judgements against defaulted clients who are home owners that is a massive concern. If a debtor has NOT failed to contact their lender and has in fact explained their change in circumstance and offered an affordable and reasonable repayment plan, it would not be thought of as treating the customer fairly to push a CCJ through a court to enable them later to apply an interim charging order!

In most cases this can be successfully defended against in court by making a clear case that this is unfair.  Indeed, one of the coalition promises back in May 2010 was that they would seek to prevent unscrupulous lenders from placing charging orders for small outstanding balances.  By making a clear case for why selling your home would cause difficulties for you and would further place your family finances in peril, the original court order/CCJ or county court judgement should not be approved by the court.

  • If however, this all seems too much, here at Lewis Alexander we are able to offer a helping hand.
  • Call us today on 0800 018 6868 and we can start to work with you to agree a repayment strategy, which may help stave off a creditor placing an interim charging order on your home.
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