Charging Order? The myth

An s268 notice is more commonly known as a Statutory Demand. It's the precursor to making an application to pursue bankruptcy (as I previously warned of) if not responded to within 21 days.

At this stage you need to consult a specialist solicitor, rather than advice from an internet forum, on how best to defend the application.

elbirch

Firstly, since 2012 creditors are able to apply for a Charging Order immediately if they are granted a forthwith CCJ. This change, however, removed any incentive to pay the debt off in installments to avoid having a CO placed on the property.

Secondly, it's nice that someone has actually read the thread to understand their position and you are correct in your understanding that you have virtually no chance of avoiding a CO being granted. So its not worth attending if your husband will lose money, however, you have nothing to lose by sending a letter to the hearing explaining why you have been unable to attend and requesting the CO is not granted as you have applied to pay by installments? (Don't hold your breath as the chances of it working are 99% against; but sending no letter ensures its 100% against? If you do send a letter make sure you also explain you have very little equity in the property.)

Thirdly, you are also correct that a creditor can't proceed with an OFS whilst you are up to date with an agreed installment plan. But you should also understand that the creditor has absolutely no chance of obtaining an OFS sale even if they applied for one as your property is a family home.

Therefore, if the repayments you have agreed put a burden on your family finances then don't hesitate to drop the repayment to just a £1 a month as there is nothing further your creditor can, or will do, to try and collect the debt. Your creditor ceased being reasonable by moving for a CO after you agreed an installment plan to repay the debt. So their is absolutely no reason for you to be reasonable with them.

I am sorry to jump onto this post but wondered if someone could help with a charging order enquiry on the recommendation of a contributer in the DFW thread I created. Long story short I jointly own my property but my husband received a final charging order on his side of the equity for a historic business overdraft he was pressured into personal guaranteeing by his business account manager at a high street bank. We can't afford to pay the debt and the creditor would not enter into a payment arrangement unless it's of substantial value to pay off quickly. The creditor has now issued a claim for an order of sale which is unfair when we have children and is only against one of the joint owners so I will be challenging it on this basis. It has been suggested there should only be a restriction order although the court paperwork says Final Charging Order - if this is the case why did a Judge allow this and does it make any difference in this situation? I have paid the £3 to land registry and there is no record of any charging order or restriction whatsoever. Can anyone offer any advice at all please?

CStar75

Firstly, if the property is jointly owned, is your primary residence and you also have children living at the property; then the chances of your creditor obtaining an Order For Sale (OFS) will be zero. So put any worry on that issue to one side.

Before I explain why, you should understand that your partner has received a Charging Order. This means a Court has made a judgement that secures the creditors debt against your husbands beneficial interest (his share of the equity) in the property concerned. This means the creditor has the right to recoup the debt from your husbands share of the sale proceeds when the property is sold (which could be through an OFS which creditors with a Charging Order can apply for at anytime.)

Charging Orders, however, cannot be registered on the deeds of a jointly owned property as an equitabe charge (where only one of the owners is responsible for the debt) and can only be notified by way of a restriction. The restriction is usually a Form K Restriction which specifies that when the property is to be sold the buyer has to notify the creditor the sale is proceeding and, also, certify to the Land Registry that notification has been given.

The overwhelming majority of creditors who go after, and receive, a Charging Order accept that they are securing the debt against an asset that will, most likely, be recouped several years in the future (up until the last recession the average wait time was 7 years.) This acceptance is borne out by the fact that Court statistics demonstrate that less than 0.05% of Charging Orders progress to the OFS stage.

The reason why so few OFS applications are made is simply because creditors understand the difficulty of obtaining them so they don't waste time and resources on what statistics show will, overwhelmingly, be a negative result.

The reason for the difficulty is down to the fact that Judges have total discretion over whether they are granted or not. Court statistics show that Judges just don't make families homeless for the sake of outstanding debt. Regardless of that fact, Children also have protections under TOLATA (Trusts of Land Act and Apointment of Trustees Act) which means the Court has to take into consideraton the rights and welfare of any children living in the property when considering an OFS.

I also wrote to the Ministry of Justice on this subject a few years back when they were considering a change to the debt threshold limit for creditors being allowed to apply for a Charging Order (which is also the limit to apply for an OFS.) It was widely expected to be raised to £25k but was eventualy set at just £1k.

The reason the MOJ gave for this decision was due to caselaw protecting primary and family homes. The caselaw they provided was;

* Caselaw - 'Mesher' type orders – provides protection as long as a minor is resident at the property concerned. The use of such orders was confirmed by a ruling in the case of Harman vs. Glencross 1986. Further powers are provided in the Trusts of Land and Appointment of Trustees Act 1996.

* Caselaw - Royal Bank of Scotland vs. Etridge 2001 - This case established the precedent that, where a joint loan has been taken out by, with a jointly owned property as collateral, such as the matrimonial home, it is incumbent on the lender to explain to all lendees at the time of signing the potential consequences of default. In this case it was ruled that one party had signed the forms without being informed by the lender of the possible consequences and that the Royal Bank of Scotland did not have the legal right to enforce by way of charging order.

* Caselaw - Bank of Ireland Home Mortgages vs. Bell 2001 - This case established the circumstances in which an order for sale would be granted, even if it concerns a family home. The equity available on the property must be sufficient to pay off the judgment creditor and all other interested parties and still leave enough money to adequately rehouse the debtor and dependants.

Unfortunately, despite the above there is nothing to stop creditors chancing their arm and applying for an OFS. But it would be really intersting to know which bank (or as I suspect which Debt Collection Agency) has applied for the OFS as, in many cases, DCA's will apply for an OFS in the hope of extracting a higher payment from creditor who believes they are about to lose their home?

Whilst I understand it can be a stressful time I always recommend anyone in your position to search the internet for families who have received an OFS because of a loan or credit card debt. The lack of examples should re-assure you that you won't be losing your home anytime soon.