A new rule is set to come into effect, which could force individuals to sell off their home in order to pay off credit card debts.
The change in legislation will allow creditors to circumvent the existing process and make it much easier to get a charging order granted.
Under the existing laws, non-payment of an unsecured debt, such as a credit card, does not automatically allow the creditor to place a charge on their property (if the debtor is a home-owner). After a default notice is issued, the case must go to court for a CCJ to be granted. If the individuals pay what the CCJ orders, as a general rule, no further action can be taken (although the amount of payment ordered can be disputed).
If, however, the CCJ payment is not made as instructed and a default issued, the creditor can go back to court to get a charging order granted. This allows a lieu to be placed on the debtor’s home and, in extreme cases, means a sale of the property can even be enforced (although the creditor would have to apply to the court again for an order of sale first)..
The new rules due to come into being from 1 October 2012, mean that any debtor does not have to default on their CCJ in order to risk losing their home. Creditors will be granted new powers to pursue a charging order against any individual, even if they have stuck to the terms of the CCJ.
The new legislation will only apply to CCJ’s issued from 1 October 2012 onwards and cannot be applied retrospectively to past court orders.
Experts have predicted that the number of charging orders will increase as creditors attempt to reclaim monies they are owed.