Charging Orders Explained
A court places an order called a charging order upon the land or home owned by a debtor.
This order is placed for the amount owed to an entity that provided unsecured credit that was not repaid as agreed.
When the debtor sells the property, the unsecured debt must be repaid before he or she may receive any proceeds.
In essence, the once unsecured debt is secured by the property through the charging order.
Timing of Charging Orders
A charging order is issued after the creditor and lender go through the County Court Judgment, or CCJ, process. The Court must have issued a CCJ and the debtor must have failed to make any payments or not paid according to Court requirements. At this point, the creditor may complete a charging order application.
Charging Order Process
After the court reviews and approves the creditor charging order application, it issues a N86 form to the debtor. This document includes the date and time of the charging order hearing. At this hearing, a judge will determine whether a Final Charging Order should be issued. If the judge deems so, the debtor is issued a N87 Final Charging Order form. The creditor receives a copy and notifies the Land Registry.
Sale of Land or Home
Even after a final charging order has been issued, the debtor is not obligated to sell the property. However, the creditor may apply for a force of sale. This rarely happens and requires court approval of the creditor application before the force of sale order may be served.