A charging order is placed upon the home or land owned by an individual in debt.
A court places this order for an amount equivalent to what an unsecured creditor provided but was not repaid.
When the property is sold by the debtor, this unsecured debt amount is repaid from the proceeds before the debtor receives any money from the sale. A charging order essentially uses the property to secure a previously unsecured debt.
After a lender and creditor participate in a County Court Judgment (CCJ) process, a charging order may be issued. A CCJ must have been issued by the court and the debtor must have failed to adhere to the court requirements regarding the CCJ or failed to provide any payments. The creditor then completes the application for the charging order.
Once the court has reviewed and approved the charging order application by the creditor, it supplies the debtor with an N86 form that specifies the time and date of the hearing for the charging order. The judge for this hearing determines if a final charging order will be issued. If the decision is yes, the debtor receives an N87, or final charging order, form. A copy is provided to the creditor, who informs the Land Registry.
A debtor with a final charging order is under no obligation to sell the relevant home or land within any specified timeframe. However, the covered creditor may apply to force sale of the property. Be aware that this happens only very rarely and the court must approve the creditor application prior to an order forcing the sale being served.