Charging orders in the County Court

What is a charging order?

A charging order is a court order to enforce a County Court judgment. If a creditor obtains a County Court judgment because you did not pay a debt and you do not keep to the payments set, a court can place a charging order on your property

A charging order gives the creditor security for the debt, in other words the debt would become "secured" like a mortgage on your house or other land.
There must be a hearing in the County Court before a charging order can be made and there are several arguments you can use to stop an order being made.
This fact sheet explains the court procedure in the County Court and what you can do. Some creditors can apply for a charging order after suing you in the High Court.

When can a creditor apply for a charging order?

The creditor can apply for a charging order if they have a County Court judgment against you and either:

You have been ordered to pay the whole debt by a certain date. This is known as a "forthwith" judgment. If you do not pay the debt in full by that date the creditor can apply for a charging order; or
The court has ordered you to pay the judgment by instalments and you have not been able to keep up the payments. If you have an order to pay the debt in instalments and are not behind on payments the court should not make a charging order. This is because of a very important case in 1987 called Mercantile Credit v Ellis. See the section "I already have an instalment order".

How is an application made?

The application for a charging order always has two stages:

The creditor makes an application for a charging order and the court will make what is called a charging order nisi if it is satisfied that you own or have a part share (have an interest) in the property in question. This is not the final order. A copy of the order will be sent to you giving at least seven days notice of a hearing in the court before a District Judge.
The creditor will also register the charging order nisi with the Land Registry. This means you cannot sell the property before the hearing.
The second stage is the court hearing in front of the District Judge. At this hearing the court will decide whether to make a permanent charge on the property. This is called a charging order absolute. It is up to you to show why the charging order should not be made absolute. The court can refuse to make the charging order so you must go to the hearing. If you cannot attend on that date, contact the court for a different hearing date to be arranged. If you do not go then the charging order is likely to be made.

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How can I stop a charging order?

The court must consider whether it is reasonable to make a charging order. Under The Charging Orders Act 1979 the court has to consider all the circumstances of the case and in particular

the personal circumstances of the debtor
whether any other creditor would be "unduly prejudiced". The court has to decide if making a charging order would disadvantage other creditors

The arguments you can use against the order being made will vary depending on your circumstances, whether you have equity in your house, and whether you own your home in joint names or on your own.

Some of the factors a court may consider

Whether any member of your family has a disability or serious illness.
Where you have a number of debts, whether making a charging order in favour of one creditor would give them unfair priority over other unsecured creditors. It is particularly useful if you can show you already have a payment arrangement in place with your other creditors. This would be affected by a different arrangement being made.
Whether there are any other creditors who might object to the order being made. The charging order nisi should be sent to all your other creditors. If they have not been informed of the hearing you can ask for the application to be dismissed or at least adjourned to allow creditors to be notified and make an objection if they wish.
If the debt is small you can argue it would be unfair to make a charging order on your home if it is worth a lot in comparison. This is based on a case called Robinson v Bailey.
Whether the creditor could have given you a secured loan when you first took out the loan. If they decided to give you an unsecured loan instead, this could be particularly relevant if you have other unsecured creditors who may be disadvantaged by a charging order being made.
Whether there are other ways the court could enforce payment of the debt. You could ask the court to make an instalment order or an attachment of earnings order so that the instalments would come directly from your wages. This only applies if you are employed and your employment would not be at risk.
If you owe less than £5000 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 absolute.
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.
If your home is not worth as much as your mortgage (also known as "negative equity") then you can argue it is not worth a charging order being made as the creditor would not be paid off even if they forced your home to be sold.
You should point out any particular hardship which your family would suffer if a charging order was to lead to the sale of the home. This is particularly important if the debt is not in joint names, as it is not then your partner’s debt.

If none of your arguments are successful and the court makes a charging order absolute you can still ask them not to allow your house to be sold as long as you pay monthly instalments.

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I already have an instalment order and I am not behind with it

If you have kept up with the instalments on a County Court judgment then the court should not make a charging order absolute. According to a case called Mercantile Credit v Ellis in 1987, a charging order should only be used if the payments on a judgment are in arrears or you were ordered to pay the judgment in one lump sum (forthwith) and did not pay. This case is very important. If you are in this situation and still have a charging order nisi made, you must go to the hearing and take evidence that you have kept up with the instalments ordered and mention this case to the District Judge. This may change in the future, you should ensure you check this information regularly.

Divorce and separation

If you are currently involved in divorce proceedings or a dispute over dividing up the former matrimonial home then you must get detailed legal advice from your solicitor. You may be able to stop a charging order being made, depending upon the stage in your divorce proceedings.

Interest

If a creditor has taken the debt to the County Court, they cannot usually add extra interest once a charging order has been made. Interest cannot be added if:

The debt is for an agreement regulated by the Consumer Credit Act. This includes most ordinary credit agreements, including bank overdrafts; or
The debt is less than £5000 in total even if it is not covered by the Consumer Credit Act.

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 partly own and will usually be your home. If you own your home in your sole name then the house will be covered by the charging order absolute. If you own your home in joint names with someone else then the charging order will only cover your share or "interest" in the property.

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Can the creditor sell my home?

It is very rare for the court to allow a creditor who has a charging order absolute to sell your home. Most creditors are prepared to wait for you to sell your home at some point in the future and to be paid out of the proceeds of the sale. If a creditor is not prepared to wait then they can apply to the court for a hearing. It is up to the court to decide whether to make an order for sale.

The court will take into account the factors outlined in the section How can I stop a charging order and in particular:

Whether a sale would raise enough money to pay off the charge as well as your mortgage
Whether the court can legally order a sale. This is only possible if the debt is in your sole name and you are the sole owner of your house, or the debt is in joint names with the person who is the joint owner of your house.

If you own your home in joint names but the debt is in your name only the creditor cannot apply for an order for sale. Very rarely the creditor may use other procedures to try to force a sale. You can still make an offer of payment at the this stage and ask the court not to order a sale as long as you keep up with the payments. You can ask the court to adjourn the order for sale proceedings or suspend the order.

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. You would need to use a form called an N244 and include evidence of payment. It is usual for creditors to register the charging order with the Land Registry. Check with the Land Registry that the charging order nisi and absolute have been removed.

Remember: You can always seek advice about any difficulty you are having in dealing with your debt.

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What is a charging order?

A charging order gives the creditor security for the debt, in other words the debt would become "secured" like a mortgage on your house or other land.
There must be a hearing in the County Court before a charging order can be made and there are several arguments you can use to stop an order being made.
This fact sheet explains the court procedure in the County Court and what you can do. Some creditors can apply for a charging order after suing you in the High Court.

When can a creditor apply for a charging order?

The creditor can apply for a charging order if they have a County Court judgment against you and either:

You have been ordered to pay the whole debt by a certain date. This is known as a "forthwith" judgment. If you do not pay the debt in full by that date the creditor can apply for a charging order; or
The court has ordered you to pay the judgment by instalments and you have not been able to keep up the payments. If you have an order to pay the debt in instalments and are not behind on payments the court should not make a charging order. This is because of a very important case in 1987 called Mercantile Credit v Ellis. See the section "I already have an instalment order".

How is an application made?

The application for a charging order always has two stages:

The creditor makes an application for a charging order and the court will make what is called a charging order nisi if it is satisfied that you own or have a part share (have an interest) in the property in question. This is not the final order. A copy of the order will be sent to you giving at least seven days notice of a hearing in the court before a District Judge.
The creditor will also register the charging order nisi with the Land Registry. This means you cannot sell the property before the hearing.
The second stage is the court hearing in front of the Distr ict Judge. At this hearing the court will decide whether to make a permanent charge on the property. This is called a charging order absolute. It is up to you to show why the charging order should not be made absolute. The court can refuse to make the charging order so you must go to the hearing. If you cannot attend on that date, contact the court for a different hearing date to be arranged. If you do not go then the charging order is likely to be made.

Go to Top

How can I stop a charging order?

The court must consider whether it is reasonable to make a charging order. Under The Charging Orders Act 1979 the court has to consider all the circumstances of the case and in particular

the personal circumstances of the debtor
whether any other creditor would be "unduly prejudiced". The court has to decide if making a charging order would disadvantage other creditors

The arguments you can use against the order being made will vary depending on your circumstances, whether you have equity in your house, and whether you own your home in joint names or on your own.

Some of the factors a court may consider

Whether any member of your family has a disability or serious illness.
Where you have a number of debts, whether making a charging order in favour of one creditor would give them unfair priority over other unsecured creditors. It is particularly useful if you can show you already have a payment arrangement in place with your other creditors. This would be affected by a different arrangement being made.
Whether there are any other creditors who might object to the order being made. The charging order nisi should be sent to all your other creditors. If they have not been informed of the hearing you can ask for the application to be dismissed or at least adjourned to allow creditors to be notified and make an objection if they wish.
If the debt is small you can argue it would be unfair to make a charging order on your home if it is worth a lot in comparison. This is based on a case called Robinson v Bailey.
Whether the creditor could have given you a secured loan when you first took out the loan. If they decided to give you an unsecured loan instead, this could be particularly relevant if you have other unsecured creditors who may be disadvantaged by a charging order being made.
Whether there are other ways the court could enforce payment of the debt. You could ask the court to make an instalment order or an attachment of earnings order so that the instalments would come directly from your wages. This only applies if you are employed and your employment would not be at risk.
If you owe less than £5000 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 absolute.
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.
If your home is not worth as much as your mortgage (also known as "negative equity") then you can argue it is not worth a charging order being made as the creditor would not be paid off even if they forced your home to be sold.
You should point out any particular hardship which your family would suffer if a charging order was to lead to the sale of the home. This is particularly important if the debt is not in joint names, as it is not then your partner’s debt.

If none of your arguments are successful and the court makes a charging order absolute you can still ask them not to allow your house to be sold as long as you pay monthly instalments.

Go to Top

I already have an instalment order and I am not behind with it

Divorce and separation

Interest

If a creditor has taken the debt to the County Court, they cannot usually add extra interest once a charging order has been made. Interest cannot be added if:

The debt is for an agreement regulated by the Consumer Credit Act. This includes most ordinary credit agreements, including bank overdrafts; or
The debt is less than £5000 in total even if it is not covered by the Consumer Credit Act.

What does a charging order affect?

Go to Top

Can the creditor sell my home?

The court will take into account the factors outlined in the section How can I stop a charging order and in particular:

Whether a sale would raise enough money to pay off the charge as well as your mortgage
Whether the court can legally order a sale. This is only possible if the debt is in your sole name and you are the sole owner of your house, or the debt is in joint names with the person who is the joint owner of your house.