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Charging Orders - An Effective Debt Recovery Tool

View profile for Martin Spencer
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So, you have an unpaid invoice, issued legal proceedings and obtained a county court judgment against your debtor. What happens next? It’s likely that if you have reached this stage, your debtor has not been particularly cooperative and you need to consider enforcement.

Debtor profiling is extremely important and the prospects of any significant recovery will often depend on the information you hold about your debtor. In order to set up a credit account, the debtor will have already provided you with a current address. However, it’s useful (from a debt recovery perspective) to know whether they are the current owner of that property. When considering enforcement, we often find that our clients understand it as being the removal of assets - due to slightly exaggerated media and TV coverage. But what is a debtor’s biggest asset? For most, it would be property. A charging order is an effective method of enforcement which is sometimes forgotten about and, in some circumstances, not used often enough.

What is a charging order?

It’s a method of enforcement to secure a debt over land or property.  For a charging order to work, the property needs to be owned either solely or jointly by the judgment debtor - joint proprietorship of a property does not prevent a debtor from being pursued. 

It should be noted that any method of enforcement is very much on a “first come, first serve” basis, therefore, time really is of the essence - this is especially the case when considering a charging order. Upon the sale of the property, any outstanding mortgage will first of all be repaid. Any registered charges will be paid after that.  If your charge is first on the list, you’ll stand a better chance of your debt being settled rather than if it’s last.

So, now you’ve secured your debt by means of a charging order, but what if your debtor doesn’t sell his property? What options are available? You could make an application to the court for an order for sale.

What is an order for sale?

This is a mechanism which can be used to enforce your charging order. A court can force the sale of your debtor’s property which gives you (the charge holder) the right to take control of the sale to pay off any debt owed.

As is the case with any legal proceedings, a court can always strike out an application for an order for sale. In making its decision, the court will take into consideration factors such as the size of the debt, the value of the property and the debtor’s circumstances, before making a final decision. Furthermore, an order for sale is quite a costly method of enforcement, so before making such an application, you should consider all of the above, as well as the possibility that there may not be enough equity in the property at the end to satisfy your debt.