Unsecured debt becoming Secured debt

hullcity2305 · 10 November 2014 at 1:19PM

I would like to post a warning to all people whom are thinking of obtaining an unsecured loan. Please be aware that if you get into difficulty paying it back and the loan is for over £1,000. A loan company can take you to court for a CCJ and then immediately apply for a charging order on your home. EVEN if the property is jointly owned. This has happened to me. I have quite substantial unsecured debt and contacted the debt charity Stepchange to set up a debt management plan. I did an income and expenditure with them and now pay them a set amount each month. However, one of my creditors was not happy with the payment being received and wanted the balance paying off within 2 years or they would look to secure the loan on my property. I informed them I could not do this so, they obtained a CCJ and then on Friday last week I received an Interim charge on the house I jointly own with my wife. This order came with a hearing date in December at which time a full charging order will be applied for. All of the unsecured debt I have is in MY name only. Yet I have been informed from Stepchange and CAB that this order will probably be granted. Although the probability of a force of sale is very low, the threat still exists. So, please be careful. Do your homework and if you can. I would certainly go for the Secured option. The interest is lower and as I have explained, unsecured does not mean that anymore!

sourcrates · 10 November 2014 at 1:27PM

Sorry to hear of your predicament, I`m sure there may be grounds to get this set aside, I am no expert on this, but hopefully more knowledgeable folk will be able to advise better than I can.

hullcity2305 · 10 November 2014 at 1:33PM

Both my wife (who has an excellent credit record) and myself, cannot believe that an unsecured debt can suddenly become secured on a jointly owned property when one of the joint owners has nothing to do with the debt! How can lenders sell a product as unsecured when it obviously is not.

sourcrates · 10 November 2014 at 1:43PM

There is one way out of it, If you are a home owner and you think that there is a risk that one of your creditors is going to apply for a Charging Order against your home the best way to ensure that this does not happen is to start an IVA (Individual Voluntary Arrangement).
Once an IVA is in place your creditors are not allowed to take any further court action against you. Any CCJs already in place are overturned and any application for a charging order is stopped.
However if an Interim Charging Order has already been issued against you then normally the only way you can prevent a Final Charging Order being issued is to attend the Court Hearing and argue your case in front of the District Judge.

Tixy · 10 November 2014 at 2:53PM

If the debt is in your sole name and the house is in joint names then a full charging order will not be granted. It would be a restriction only.

And with just a restriction a forced sale is not an option (not even a tiny remote possibility).

This thread explains the difference between a restriction and charging order - Charging Order? The myth

That said I would still try to make cases against the charging order (both you and the other owner of the house separately) - some useful points to use here - https://www.nationaldebtline.org/EW/factsheets/Pages/15%20EW%20County%20court%20-%20charging%20orders/Page-03.aspx#

hullcity2305 · 10 November 2014 at 4:35PM

Thank you for your post. I have read the article in your post but, this dates prior to October 1st 2012. Since then the law has changed big style in favour of lenders.

longtermplanner · 10 November 2014 at 5:16PM

The thread linked to by Tixy is incredibly long and not very helpful to read as there is so much waffle on it.

The facts are that if a property is in joint names, a charging order will be granted but it is registered as a "restriction" not as an "equitable charge". See the section on "jointly owned property" here http://www.hmrc.gov.uk/manuals/dmbmanual/dmbm667320.htm

In October 2012 the law was indeed changed in favour of lenders, but the change had nothing to do with jointly owned property. Before Oct 2012, a charge could only be registered after a CCJ if the borrower did not keep up with the court-set installments. After Oct 12, the lender can apply for a charging order even if the the borrower does make the required CCJ monthly payments.

Do your homework and if you can. I would certainly go for the Secured option. The interest is lower and as I have explained, unsecured does not mean that anymore!

That is very dangerous advice. In practice few unsecured lenders go for charging orders and then only after a considerable period of default by the borrower. If instead you choose a secured loan, then your house is at risk as soon as you cannot make the repayments.

Unsecured debt becoming Secured debt

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