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How a Non Secured Debt Becomes a Secured Debt?

Pan_3
Posts: 80 Forumite
Is it correct that a creditor can turn a non secured debt into a secured debt by applying a charging order on property?
I am under the impression that if a creditor takes you to court for non payment of a non secured debt and a CCJ is issued then the creditor can force a charging order against your home....once this is done the creditor can them petition for the order to be applied immediatly rather than just having redress if the house is sold by the owner willingly? I don't know if this is correct or not but if it is does this not mean that the term unsecured is actually meaningless if the creditor can force you to sell your home?
My wife has just started a DMP with CCCS and she does have about 9 creditors that makes the proccess harder. Barclays wrote today to advise that the offer made has been rejected as it is not a realistic offer to clear the debt in a realistic timescale....this amount was of course worked out using the CCCS guidelines so it's obvious to them that its not going to be any more than that...Barclays have advised that they are closing my wife's account and transferring the debt to their collections people. I am assuming that this is standard procedure...if the offer is not accepted by them my understanding is that my wife will have to go to court. what I cannot understand is why Barclays would do this as surely any court will see that my wife has made a reasonable offer to pay bearing in mind her other commitments. All I can think is that Barclays may be keen to get a charging order on our property...CCCS did seem to suggest that creditors usually accepted the pro rata offers made through them.
Any advise or thoughts would be greatly appreciated.
I am under the impression that if a creditor takes you to court for non payment of a non secured debt and a CCJ is issued then the creditor can force a charging order against your home....once this is done the creditor can them petition for the order to be applied immediatly rather than just having redress if the house is sold by the owner willingly? I don't know if this is correct or not but if it is does this not mean that the term unsecured is actually meaningless if the creditor can force you to sell your home?
My wife has just started a DMP with CCCS and she does have about 9 creditors that makes the proccess harder. Barclays wrote today to advise that the offer made has been rejected as it is not a realistic offer to clear the debt in a realistic timescale....this amount was of course worked out using the CCCS guidelines so it's obvious to them that its not going to be any more than that...Barclays have advised that they are closing my wife's account and transferring the debt to their collections people. I am assuming that this is standard procedure...if the offer is not accepted by them my understanding is that my wife will have to go to court. what I cannot understand is why Barclays would do this as surely any court will see that my wife has made a reasonable offer to pay bearing in mind her other commitments. All I can think is that Barclays may be keen to get a charging order on our property...CCCS did seem to suggest that creditors usually accepted the pro rata offers made through them.
Any advise or thoughts would be greatly appreciated.
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Comments
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I think you are correct in saying that a CCJ can be issued against your debt and put a charge on your home.
I have always believed that the only time that the creditor has any rights in this circumstance is if you sell the property they have a legal right to reclaim there debt.
Its highly unlikely that the can turn a unsecured debt into a secured debt in the way you are thinking as otherwise we could all be in hot water and many more of us would possibly have lost our homes already.
Have you spoke the CCCS regarding this? I have found that they are excellent at offering this type of advice.
I’m sure someone will know the proper ins and outs of it and will post soon.
Good luck with.Official DFW Nerd Club - Member no. 297 - Proud To Be Dealing With My Debts0 -
If your wife has a CCJ issues and she doesn't pay it, the creditor can ask for an Oral Examination N39 to be undertaken, giving a complete picture of your financial circumstances.
In this event, if you own your home and you cannot pay the debt, even in installments or you default on your agreed payments, they creditor may go back to the county court to get a final charging order on the property, this means when you sell the property, they get paid from the profits, providing there is some, I don't know how it works if you have no equity or if you have multiple charging orders though!!£2 Coin Savers Club (Christmas)- £86£1 Jar (Christmas)- £29Christmas Vouchers Saved: £1450 -
dexters_mum wrote:If your wife has a CCJ issues and she doesn't pay it, the creditor can ask for an Oral Examination N39 to be undertaken, giving a complete picture of your financial circumstances.
In this event, if you own your home and you cannot pay the debt, even in installments or you default on your agreed payments, they creditor may go back to the county court to get a final charging order on the property, this means when you sell the property, they get paid from the profits, providing there is some, I don't know how it works if you have no equity or if you have multiple charging orders though!!
Cheers!
I was aware of that but I have been told that a creditor no longer actually needs to just put a charging order on hold but can instigate the sale of your property in order to clear their debt.
It was suggested that this could be done regardless of whether you had paid the agreed installments all the creditor needed was the charging order in place. The crux of this is has legislation changed that means a creditor who has a charging order can instaigate the sale of your property rather than having to wait until you voluntary sell it??0 -
Hi Pan,
Just checking my debt advice handbook and it does state that when a final charging order is granted it is at the creditors discretion whether to wait for the property to be sold or whether they wish to apply for an order of sale.
If they were to apply for an order of sale then the case would be heard before a County Court judge who would have to decide whether to give the go ahead or not.
It is quite rare that a judge would order this unless you have intentionally failed to repay.
If a creditor wishes to force a sale permission has to be given by the 1st charge holder - usually the mortgage. If they believe that a forced sale would not benefit anyone because say their is little or no equity they could put in for this to be dismissed.
The potential could be that if someone had a mortgage and a secured loan and a couple of charging orders there is the possibility that if the 4th charge holder forced a sale and after all funds have been divided up then they may not get anything as everyone else has to be paid before them.
Creditors will always tread carefully as they could lose a lot of money.
EE0 -
I would check this out with your local county court because I was always under the impression a charging order had to be made on unsecured debts and obviously any secured debt can get your home repossessed...
Have a look on https://www.hmcs.gov.uk or ring your county court in the morning, there are always people willing and able to speak to you on these issues, my husband has picked their brains lots of times and they have been excellent.£2 Coin Savers Club (Christmas)- £86£1 Jar (Christmas)- £29Christmas Vouchers Saved: £1450 -
best to think about what is likely to happen rather than the letter of the law.
But in law you can be made bankrupt for any debt over £750 which will force the sale of property if necessary.0 -
CLAPTON wrote:best to think about what is likely to happen rather than the letter of the law.
But in law you can be made bankrupt for any debt over £750 which will force the sale of property if necessary.
So, if that is the case why do creditors not force bankrupcy on people? Whay I can't really get my head round is the concept of secured and non secured debt. If it is true you can be made bankrupt on ANY debt over £750 them those terms are actually meaningless.0 -
just some thoughts on the matter:
obviously only the creditors can tell you why they behave as they do but some reasons:
rational
ways of maximising their return
a. bankruptcy : only gives them back much if you have assetts i.e. force the sale of your property, although you may have to pay a IPA (but generous compared to IVA).... also as the OR will have high costs (no reason for him to cut costs is there?) this may not bring much in:
b. IVA ..in theory only used where the return is greater than in bankruptcy
c. DMP usually returns more than IVA or bankruptcy especially if there are no assetts.
PR
not every high street bank wants to make lots of people bankrupt ..doesn't look good in the newspapers
Law
well much of English law depends upon the judge so the result is not always clear cut and the expenses are considerable..obviously a bank will use a real (expensive) solicitor
from the debtors point of view there is, in extremis, not much difference between secured and unsecured debts but from the point of view of the creditor there is. The secured creditors have first (or at least prior) claim on the assetts in the sale of the assett (property usually) so securing their interest before the unsecured creditors.0 -
Also CCCS has warned me about the charging orders or possible forced sale and aked me what I'd do (i have 2 littlies) and I said I'd go straight to the papers - he said exactly! Also often, although not always, it doesn't get this far if all is being done to pay the debts etc. not sure if this helps, but I thought I'd add it.
Sea xxCCCS DMP:Feb 07
Total:£37,016.47 now £0 DEBT FREE FEB 14
2022 Decluttering Campaign 49/10110 -
CLAPTON wrote:just some thoughts on the matter:
obviously only the creditors can tell you why they behave as they do but some reasons:
rational
ways of maximising their return
a. bankruptcy : only gives them back much if you have assetts i.e. force the sale of your property, although you may have to pay a IPA (but generous compared to IVA).... also as the OR will have high costs (no reason for him to cut costs is there?) this may not bring much in:
b. IVA ..in theory only used where the return is greater than in bankruptcy
c. DMP usually returns more than IVA or bankruptcy especially if there are no assetts.
PR
not every high street bank wants to make lots of people bankrupt ..doesn't look good in the newspapers
Law
well much of English law depends upon the judge so the result is not always clear cut and the expenses are considerable..obviously a bank will use a real (expensive) solicitor
from the debtors point of view there is, in extremis, not much difference between secured and unsecured debts but from the point of view of the creditor there is. The secured creditors have first (or at least prior) claim on the assetts in the sale of the assett (property usually) so securing their interest before the unsecured creditors.
Thanks for your opinions. Thinking about it I can see the point you are making in the last paragraph. When me and my wife take into account our mortgage and subsequent remortagages we only have about £15K left in the property and we owe about £50K...cannot really see the logic in a creditor pushing for bankruptcy but will just have to see how it pans out! Cheers again!0
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