Charging orders: Homes repossessed for credit card debt | This is Money Page 1 of 3

email GO

Dealing with debt

Homes can be seized for credit card debt

Alan O'Sullivan, This is Money
11 November 2008
Reader comments (17) | Chat | Vote

Indebted borrowers can be forced to sell their homes to repay credit card debt
due to a little-known legal loophole - charging orders.

According to sources from within the debt advice industry, some borrowers
with as little as 1,000 of credit card debt have been forced to sell their homes
through charging orders.
This is despite recent moves by the Ministry of Justice to protect vulnerable
borrowers in the wake of the credit crunch.

- Mortgages: Homes snatched for two missed payments

Charging orders were first introduced in 1980, but their use has dramatically
increased in recent years: there has been a tenfold increase in since 2000 and a
100% increase over the past two years.

Creditors can force a borrower to sell their home to repay unsecured debts
through a 'charging order', a process which has come to light after Yvette
Cooper, chief secretary to the Treasury, called for more measures to help people
in danger of losing their homes.

In response to this, the Ministry of Justice decided to shelve plans to strengthen

the act underlying the orders, the Tribunals, Courts and Enforcement Act 2007,
in favour of banks.

Are you worried about the safety of your home after receiving a charging order?
Read our step-by-step guide to charging orders to find out more...

Under the draconian revision, which has been given Royal Assent but will
remain unenforced for the foreseeable future, banks would have had the right to
force people to sell their homes without seeking a county court judgment.

Shockingly, they could even do this if these people were keeping up to date
with their loan repayments after agreeing a repayment schedule through the
county courts.
The move was aimed at preventing indebted people from securing low monthly
repayments and a freeze on their loan interest, then voluntarily selling their
home, saving money in loan interest in the process, according to the Ministry of
Justice.

http://www.thisismoney.co.uk/dealing-with-debt/article.html?in_article_id=456909&i... 22/03/2009
Charging orders: Homes repossessed for credit card debt | This is Money Page 2 of 3

However, an obvious consequence of the revision is that people who are

making an effort to stick to agreed repayments may be involuntarily turfed out
on the street by lenders.

One way in which the revision could have benefited borrowers by setting a
minimum limit on the amount owed for which a house could be sold has now
also been put off indefinitely.

Therefore, debtors could theoretically be forced to sell their homes for only
1,000 of unpaid, unsecured credit card debt.

Despite this, people at risk may be able to escape the consequences of a

charging order by following a step-by-step guide.

The revisions may have been delayed to protect borrowers in difficult times, but
when This is Money put it to the Ministry of Justice that the Act seriously
disadvantages borrowers nonetheless, a spokesperson said: 'Although the
changes to the Act were put on hold to benefit debtors, there is a chance some
debtors may have to sell their homes to repay smaller amounts of debts.'

Dealing with debt

Take the debt test

Get answers to debt questions
Simple-step guides to beating debt
Latest debt news and advice
Calculator: A quick credit card debt reality check

Vince Cable, the Liberal Democrat Treasury spokesman, said: 'No one should
be allowed to lose their home simply because of a credit card debt. More needs
to be done by the government to ensure that lenders simply do not act
overzealously, and only take possession of properties as a last resort. The fact
that banks can now kick people out of their homes for not keeping up with their
unsecured debts is very worrying.'

Although the Citizens Advice Bureau would not comment on the Act as the
minimum limits for charging orders has yet to be decided, a spokesperson said
the Act would make it 'easier for creditors to get their money'.

Ads By Google

Credit Card DebtWrite Off Your Debts Over 5k WithA Government Backed
Solution.www.debtfreehelpline.co.uk
Bad Debt UkDo You Have Bad Debt ? Find OutHow We Can Help You, in 1
Minute.www.HarringtonBrooks.co.uk
IVA -National Debt ReliefGovernment Debt Solutions to cleardebts over
20,000www.NationalDebtRelief.co.uk/IVA

Mail online This is London Metro TravelMail

FMWF | Loot | Jobs | Homes & property | London jobs | FindaProperty.com

Used car search | Primelocation.com | Educate London | All sites

Part of the Daily Mail, The Mail on Sunday, Evening Standard & Metro Media
Group
Associated Newspapers Limited 2009 Terms Privacy policy Advertise
with us

http://www.thisismoney.co.uk/dealing-with-debt/article.html?in_article_id=456909&i... 22/03/2009
Charging orders: Homes repossessed for credit card debt | This is Money Page 3 of 3

http://www.thisismoney.co.uk/dealing-with-debt/article.html?in_article_id=456909&i... 22/03/2009