Credit Card Debt Could Cost Someone Their Home

Not Paying Unsecured Debts Can Lead to Property Repossession

Jan 5, 2009

Credit card debt can lead to property prepossession. A charging order can result in the registration of an interest in the property with the land registry.

Those with credit card debt and other unsecured debts have been warned that owing as little as £1000 could potentially result in property repossession. This has left many debtors wondering what the practical distinction between secured and unsecured debts actually is.

What is a Charging Order?

A charging order permits a creditor to register a lein or interest with the land registry for the amount of outstanding unsecured debt or credit card debt. This means that there is no practical difference between a secured and an unsecured debt.

A charging order has the effect of preventing a remortgage, secured loan or even a house sale without the creditor that has issued the charging order being informed. This can result in any of these actions being blocked by the 'unsecured' creditor.

How Can a Creditor Get a Charging Order?

The practical reality is that there are a number of stages that a creditor would have to go through before getting a charging order. It is firstly necessary to get a CCJ or County Court Judgement registered against a debtor's name in respect of the outstanding debt.

Whilst some CCJs result in a means-tested instalment order, a surprisingly large number are resulting in a requirement that the debt is paid in full. A CCJ will result in a time order and the debtor is given a specific amount of time to meet the terms of this.

Should a debtor fail to comply with a time order, the creditor will make moves to register a charging order against the property. The first stage of this is to register an interim charging order against the property which gives the court time to check that the debtor owns the property.

A Charging Order for Smaller Debts Can be Blocked

A charging order can be blocked as a result of getting a remortgage to repay the debt. Given the relative complexity of the case, it may be advisable to use the services of a mortgage broker. Alternatively, the debtor can ask the court to allow them to pay the credit card debt or other unsecured debts through a series of monthly instalments.

A Charging Order for Serious Credit Card Debt Can be Blocked by an Individual Voluntary Arrangement

The debtor has the opportunity to object to a charging order if in the process of obtaining an Individual Voluntary Arrangement. An IVA gives a debtor the opportunity to right-off up to 75% of debts by making a series of monthly instalments over a 5 year period. It completely prevents creditor harassment.

If credit card debt is a problem, seek a debt solution such as an Individual Voluntary Arrangement. Don't just wait for creditors to take legal action. If a charging order is applied for by a creditor, offer a repayment plan. Failing to do so could mean that credit card debt and other unsecured debts lead to a charging order or even property repossession.

Those that found this article helpful may also be interested in avoiding loan sharks.

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