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Does a DMP protect my house from a charging order

Does a DMP protect my house from a charging order

If you are a home owner you may be considering a Debt Management Plan (DMP) because it is informal. As such you will not be forced to release equity from your property. However one of the disadvantages of this debt solution is that it does not give you or your property any legally protection. This means that your creditors can still take enforcement action against you to collect their debt. This could include applying for a Charging Order against your property.

What is a Charging Order?

A Charging Order affectively changes an unsecured debt such as a credit card or personal loan balance into a secured debt against a property you own. If at the time you come to sell your home the debt is still outstanding it must be paid in full from any equity available before you receive the balance.

Once a Charging Order is issued the creditor cannot then force the sale of your home. As such you can continue to pay off the debt. A good way of doing this is to still include it in your Debt Management Plan. However the creditor knows that they have the added protection that if you sell your home the outstanding debt will be paid in full.

DM4U Tip: Any creditor who has a Charge against your property cannot influence your decision about when or if you sell. The only way they can do this is to return to the court and apply for an Order for Sale. However the Court is unlikely to grant this if the property is your home.

Are you likely to get a Charging Order if you start a Debt Management Plan?

Although it does not offer you any legal protection starting a Debt Management Plan should significantly reduce the risk of getting Charging Order. As long as your creditors agree to your reduced payments it is likely that they will suspend any further enforcement action against you.

Before any of your creditors can apply for a Charging Order they must first apply for a County Court Judgment (CCJ). It is unlikely that they will do this if you are making regular payments into your Plan which they have accepted.

DM4U Tip: Starting a Debt Management Plan does not guarantee that your creditors will suspend their enforcement action. If any of them does not accept your payment proposal they could still act. If you feel that your creditors are continuing to act aggressively and you are worried that they might take further court action you should take advice and even consider using a different debt solution.

Can you include a charging order debt in a DMP?

Government figures show that the number of charging orders awarded has fallen in the last three years. However, in the first three months of 2011 there were still around 24,000 Charging Orders granted by the courts. This equates to nearly 100,000 Charges that will be granted this year.

The only way you can be sure that interest and charges will be frozen and that no further legal action will be taken against you or your home is by using an alternative solution. As a home owner the option that you should consider is an Individual Voluntary Arrangement (IVA). However you must understand that you may be required to release equity as part of this agreement.

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    2 thoughts on “Does a DMP protect my house from a charging order

    1. Doug says:

      I have a property the has a charging order on it from the legal aid agency. The order is against me personally. The order has been secured against a property that owned as tenants in common. Do you know what would happen when the property is sold if its value is equal to the amount of the charge. How would the other party who owns the property get their money?
      Thanks

      1. Hi Doug

        I am not a solicitor so you will have to check this. That said, it is my understanding that where there are tenants in common (ie joint owners), the charge is registered as an equitable charge. The owner of the charge then has the right to register a restriction against the property. However, this only means that they only have the right to be notified about any sale. The debt itself does not have to be paid if the property is sold.

        In other words, I believe you could sell the property without paying the charge. Any equity could be divided between the owners as per the tenants in common agreement. The debt for which the charge was issued would still be owing but by definition would then be unsecured again.

        As I have said you need to check this with a solicitor but I believe it is correct.

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