Charging Order? The myth

eggbox

As far as I'm aware it still is

sampete

Hi eggbox after many years hassle free from Restons ive been informed HSBC has sold the debt to MFPD Ltd Restons continue to manage the account. This is in relation to a type k restriction as discussed some time ago. How will this affect me please any advice appreciated thank you

eggbox

It doesn't make any difference to your position  other than a new creditor owns the debt. I would, however expect some contact from them, initially offering a repayment plan, but then moving on to the same kind of threats Restons used to use. As always just ignore them, otherwise it encourages them to keep contacting you as they think you're weakening.

sampete

Many thanks eggbox puts my mind to rest. Glad th thread still here and yourself contributing. All the best thank you 

PanPen

If a CO was obtained in 2013, we haven't paid or contacted them since they got it. What happens if we move? I see people talk about some being unenforceable but when does that actually happen? 

eggbox

Hi PanPen

Everything below is explained in this thread, but to explain it quickly here......a Charging Order (CO) is an enforcement method used after a creditor obtains a County Court Judgement (CCJ) for the debt it's owed, when the debtor still hasn't settled the debt.  The CO secures the creditor's debt against an asset the debtor owns (in your case the property you own) and when that asset is sold, the creditor has a legal right to collect the value of the debt from the proceeds raised by the sale of the asset.

So, what will happen when you sell your house is that your solicitor will deduct the value of the debt from the sale proceeds and give them to the creditor. The age of the debt is of no consequence, as CCJ's don't expire.

However.......................what this thread is explaining is that you have an option not to pay the creditor upon sale, if the property is jointly owned and only one of the joint owners owes the debt. This is because in those circumstances, the creditor can't register the CO as an equitable charge on the property (rather like a mortgage charge and which would have to be settled before the property can be registered in a new owners details) it can only be registered by what is called a restriction on the deeds (usually a Form K Restriction.) A Restriction only notifies on the deeds that a CO exists against the financial interest of one of the owners..

A Form K Restriction places no obligation, on the seller, to settle the creditors debt when a property sale occurs. Instead, the Restriction only needs complying with to allow the property to be sold and register a new owners details on the deeds. All that is needed to comply with the Form K Restriction, is to notify the creditor the property is being sold, and to confirm to the Land Registry that the creditor notification has been carried out.

Complying with the Form K Restriction doesn't remove the Restriction on the deeds, however, when the new owners details are registered on the deeds, the Land Registry will automatically cancel the Restriction as, at that stage, it becomes "overreached". 

This process means you can retain all the proceeds upon sale and the creditor still doesn't get paid. The CCJ and debt still exists, but it places the obligation on the debtor to chase the debt by another means as the asset has been sold and they still haven't been paid.

As many posters who have taken this option will confirm, the debtor usually gives up at this stage as it requires further time, effort and expense to chase the debt.

The catch, however, is that you require the assistance of the solicitors/conveyancers being used for the sale to pay you all the proceeds and not deduct the creditors proceeds upon sale. The majority won't help you with this, but some will. The difficulty, therefore, is finding a solicitor willing to help. But as you will read, many posters have found that help.



  

PanPen

Thanks Eggbox for your detailed answer. Perhaps I didn't explain myself very well. 

What I mean is, Once we move, I appreciate the debt is still owed but if it dates back to say pre 2018 and they haven't done anything to enforce it, if they went back to court could a co being given on the new house?

eggbox

Yes they can. What you may be getting confused with is enforcement of a CCJ. If a creditor hasn't tried to enforce the CCJ for six years they may have difficulty trying to enforce the debt after that period.

But your creditor did enforce their CCJ by obtaining a CO, so that won't be an issue. So the key is to set up any new purchase in a way that prevents that.

PanPen

eggbox said:

Yes they can. What you may be getting confused with is enforcement of a CCJ. If a creditor hasn't tried to enforce the CCJ for six years they may have difficulty trying to enforce the debt after that period.

But your creditor did enforce their CCJ by obtaining a CO, so that won't be an issue. So the key is to set up any new purchase in a way that prevents that.

OK so I've been reading back to try and get my head round this, do you mean that we would need to buy and not put me on the deeds of the new house? Problem is we need both salaries for the mortgage.  

eggbox

There's no easy answer as not having you on the deeds is the easy way to avoid another CO. But as you say you need both salaries to get another property, its a Catch-22 situation.

However, buying another property with you on the deeds is may be worth the risk for two reasons. Firstly, whilst there's no guarantee, history does show that most creditors give up after failing to be paid on sale.

Secondly, you can use the same process again if the creditor does obtain another CCJ.

But only you can decide if the risks worth taking.