Charging Orders a Threat to some Debtors

Good Free Debt Management Advice – Defence Against Unfair Creditors

Jun 27, 2009

Citizens Advice has highlighted the threat from some lenders to use Charging Orders to force those with unsecured judgment debts into repaying unaffordable amounts.

In a recent report, Citizens Advice Bureau (CAB) Chief Executive David Harker said: “The law as it stands at the moment leaves debtors far too exposed to unfair treatment and the risk of losing their homes from unsecured creditors…”

Unsecured Judgment Debt

While acknowledging, that to date, few have lost their homes (there is a second court stage to go through before repossession) Harker’s view was that some creditors were trying to intimidate vulnerable judgment debtors into paying more than they could afford.

Charging Orders

The Office of Fair Trading (OFT), the UK’s consumer and competition authority, is currently carrying out a wide-ranging review into the use of Charging Orders as a method of enforcing judgment debts.

In a June 2009 update the OFT said: “The interim results of this review indicate that there may be potential problems with the way in which some creditors use Charging Orders as part of their debt enforcement activities.”

While Citizens Advice welcome the OFT review they have challenged the Ministry of Justice to re-examine current legislation and limit access to Charging Orders when debtors are already striving to repay outstanding amounts.

Debt Management Plan

Of course a structured repayments regime lies at the heart of any debt management procedure. A court is always more likely to be more sympathetic towards a debtor's plight if for example, a well-prepared debt management plan (DMP) is in place.

However there are thousands of organisations offering debt management advice; it is for the unwary and vulnerable a minefield. While many of these companies will offer reasonable advice and will be happy to set up a DMP, they will charge for it. Consequently a sometimes sizable chunk of the amount the debtor is repaying will go to the company and not to their creditors.

Debt Counseling

So where are the places to go for free and independent debt advice? The Citizens Advice Bureau, which can be found throughout the UK, might well be the starting point for those seeking debt help. They offer a range of services including:

These other organisations listed below can also help those looking for free and independent budgeting or financial planning advice.

The information in this short article is not exhaustive and does not constitute financial advice.

Sources:

Citizens Advice website, evidence on the use of charging and orders for sale in debt collection, 25/6/2009

UK Ministry of Justice website, Practice Direction — section one, charging orders, (undated)

The copyright of the article Charging Orders a Threat to some Debtors in Personal Debt Management is owned by Neil Gunn. Permission to republish Charging Orders a Threat to some Debtors in print or online must be granted by the author in writing.