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New - £1,000 Payday Loan or Credit Card debt can now easily be secured on a debtor’s home

Friday, 12th April 2013

The coalition government has done a spectacular u-turn on the threshold level required before a creditor can apply a charging order on a borrower’s property.

Back in 2010 the coalition government hinted that the level of unsecured debt before a charging order would be considered would be set at £25,000 per creditor. Until now there was no fixed limit but they have stunned debt counsellors, vulnerable house owners and the debt management sector in general by setting the threshold to just £1,000. The new regulations came into force 6th April 2013.

What is a charging order?

A charging order is a court order that places a 'charge' on a debtor's property, turning unpaid, unsecured judgment debts into secured debts. This means that once any prior ranking charges on the property have been settled, the debt must be paid back out of the available proceeds of sale when the debtor sells the property.

To get a charging order the creditor will first have to get a county court judgment (CCJ) on the debt through a court. Under new rules that came into place Oct 2012, the creditor can now ask for the charging order at the same time of judgement.  New rules speed up the way creditors put credit card debts on people’s homes

What is an unsecured debt?

Credit and store cards, Payday loan, catalogue debts and personal loans or bank overdrafts. Basically anything that is not secured such as a mortgage or hire purchase on a car or household good.

Can the court make me sell my house through my debts?

Yes: whilst Orders of sale are not common once a charging order is secured on a debtor’s property the creditor can ask the court for one and just over 400 such orders were made in 2011.

Should the bankruptcy threshold level have been increased instead?

The government’s change of direction probably came about after justice minister Helen Grant, who did not want to encourage debtors to lose their home through any bankruptcy scenario, told Parliament back in January that placing a high threshold (£25,000) on charging orders would encourage creditors to initiate bankruptcies as an alternative.

Unfortunately no one thought about increasing the ridiculous minimum level of unsecured debt required before a debtor can be made bankrupt, it still sits at £750, to counter this!

What is the OFT going to do about this?

Not a lot it seems.

In the past the OFT has imposed requirements  and sanctions on major banks in respect of the way charging orders were imposed.

My concern is that the OFT will take too long find out what individual lenders are up to, and during this time how many home owners will have gone through torment and distress or even lost their home?  Read more on RBS & NatWest warned over the way they deal with unpaid debts

The new regulations came into force 6th April 2013 under ‘Charging Orders (Order for Sale: Financial Thresholds) Regulations 2013’ and clearly will prove to be somewhat unpopular for those in financial difficulty but be welcomed by creditors.

There is no such thing as unsecured debt if you are a house owner; the sooner this is made clear to the unsuspecting borrower the better!

BBC West Midlands - No such thing as unsecured debts for home owners

You can listen to Mike on BBC West Midlands as he explains how there is no such thing as an unsecured debt (credit card or payday loan) if the borrower is a house owner as these debts then can now easily be secured on people's homes following recent changes in debt enforcement.

Mike also explains the lender's perspective on why they are applying for charging orders, he calls it 'asset rich - cash poor' debtors.

Listen to show

 

 

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