Can your house really be at risk if you get into difficulties repaying something like a credit card bill?
You might think the answer is “no”, but there are some very rare situations where this can happen. It helps to know the facts, so you can make good decisions about how to deal with your debts.
To be able to sell your house a creditor has to:
- start by getting a County Court Judgment (CCJ);
- go back to court to apply for a Charging Order; and
- go back to court again t0 ask for an Order for Sale.
This article looks at unsecured debts – credit cards, unsecured loans, catalogues, payday loans etc. It doesn’t apply to secured debts such as your mortgage, where the rules for repossession are very different.
Step 1 – County Court Judgment (CCJ)
Just because you have defaulted on a debt or it has been sold to a debt collector doesn’t mean you are going to be taken to court for a CCJ. And without a CCJ, there is no chance of a charging order or a visit from bailiffs.
If you don’t have a CCJ but a creditor is threatening this sort of thing then don’t panic, they are just trying to pressure you into paying them. But don’t panic doesn’t mean ignore them.
A debt collector is much more likely to go to court for a CCJ if you ignore them. So read Threats of CCJs – Is the Debt Collector Bluffing? which looks at what you should do.
You know a debt collector is getting serious about going to court when you get a Letter before Action/Claim. Read What to do if you get a Letter before Action to see how you should complete the Reply Form with the letter. There may be ways you can challenge this debt. or you could get the creditor to accept a payment arrangement.
If you don’t do that and get a Claim Form from the court, you need to take action, even if you can’t afford to clear the debt. See What to do if you get a Claim Form for details.
If you are at all unsure, phone National Debtline on 0808 808 4000 who can discuss the details of your case in confidence. National Debtline are excellent on everything on this page – CCJs, Charging orders and Orders for Sale.
Step 2 – Charging Order
I am assuming here that the CCJ was obtained after October 2012. If it was earlier, contact National Debtline for advice.
A creditor can apply for a Charging Order even if you are making the monthly payments set for the CCJ.
When a court grants a Charging Order, a legal charge is put on your house.
If you own the house with your partner, the Charging Order is only made against your share of the equity – your partner’s share will not be affected by it. This is sometimes called a “restriction”.
The order of charges matters. Say you already have a mortgage and a secured loan – this new charge will then be third in priority. If your house is sold your mortgage is paid off first, then the secured loan then (if there is enough equity left) this new charge.
It is not automatic that a Charging Order will be granted. You can defend this by arguing that it would be unfair to you, to other people that live in your house, to the joint owner of your house or to your other creditors.
You can also ask the court to add conditions – for example that the house cannot be sold until your children are over 18 say.
See this National Debtline factsheet for more information about the court process of a Charging Order and how you may be able to challenge it.
Step 3 – Order For Sale
An Order For Sale is a court order which forces you to sell your property – the creditor will then be paid back because they have a Charge over the property, see above. If you don’t pay the debt or leave the property within 28 days, your creditor can apply for a warrant of possession to force you to leave the property.
An Order for Sale will only be granted if there is already a Charging Order that has been made final and if the debt is more than £1,000.
If the CCJ was after October 2012, the Order for Sale will not be granted if you are up to date with the CCJ payments.
As with a Charging Order, you can defend an application for an Order For Sale on various grounds.
It is worth doing this even if you tried and failed to prevent a Charging Order on similar grounds – the judge may well decide that the Order For Sale is unfair to someone else as they would lose their home.
You can also make an offer of monthly payments at this stage and ask the court to suspend the Order so it won’t apply if you make the payments. See the National Debtline factsheet for more details.
How often does this happen?
You might think creditors will rush to get to Stage Three, the Order for Sale, as fast as possible.
This isn’t correct.
Creditors don’t want to go to court once, let alone three times. It costs them time, money and at any stage their court application may be refused, so it’s risky. And selling a house is even more hassle.
Creditors would much prefer to find an acceptable repayment solution and not bother with any of this court action!
Normal consumer creditors such as credit cards, banks, payday loans are very unlikely to go for a Charging Order.
The main exception here is guarantor loans, where lenders such as Amigo can be very fast to take a guarantor to court for a CCJ and then they often apply for a Charging Order. But Amigo don’t routinely apply for Orders for Sale.
Look at this chart showing how the number of CCJs in England and Wales has gone up since 2014. At the same time the number of Charging Orders has actually fallen.
In 2014 there was about one Charging Order for every twenty CCJs.
By 2018, this had dropped so there was only one Charging Order for every fifty CCJs. That proportion remained the same in 2019.
So Charging orders are less common than they were.
The number of Orders for Sale is so tiny they wouldn’t show on that chart at all. In 2013 there were only 220 Orders for Sale.
Ways to keep your house safe
So the number of Charging Orders is small and the number of Orders for Sale is incredibly tiny:
- if you talk to your creditors and don’t ignore them, you probably won’t get a CCJ let alone a Charging Order;
- if you do get a Charging Order, the creditor cannot get an Order for Sale if you are making the monthly payments on the CCJ.
So don’t be an ostrich. Debt problems get worse if you ignore them, they don’t go away.
Where it’s the added interest that is causing problems, talk to the creditor about a payment plan or talk to a debt adviser about a Debt Management Plan.
With impossible debts, get good debt advice on your options. It’s good to do this as soon as possible but it is never too late!
If your creditor goes go to court, respond fast, do not ignore it. There may be ways of contesting CCJs, Charging Orders and Orders for Sale that will work for you. If you do nothing, the creditor will get what they are applying for.
So get help!
National Debtline doesn’t just have a great set of factsheets, they can also give advice to individuals about their specific cases. Unless you are completely confident in what you are doing, give them a ring on 0808 808 4000 and talk things through with them.