• 08 SEP 15
    How to use a charging order to recover outstanding debt

    How to use a charging order to recover outstanding debt

    Following on from the previous blog in WHN’s debt recovery series, regarding third party debt orders, Amy Richardson now shares her top tips on using charging orders to recover outstanding debt.

    Once a claim for outstanding debt has been made and a judgment is obtained to claim back the money owed to you, there are a number of ways in which this can be enforced.

    Charging orders are a mechanism to secure your judgment over property, whether that is land, stocks or shares, so these orders are particularly effective in securing funds if you know that the debtor is about to sell their property.

    Before you do anything it is important to ensure that the debtor is the owner of the property you are looking to make an application against. A land registry search can help confirm this.

    The searches will reveal if other charges have been made and whether these will take priority over yours, so if the search finds that a series of charges are already registered, then you may want to consider other enforcement options. This may be the case particularly in instances where the property is not of high value as the price of the property may not be enough to cover all of the claims made.

    To ensure the greatest chance of securing the funds rightly owed to you, an application should initially be made for an interim charging order. This will prevent the debtor from selling their property and siphoning funds without your knowledge before the final order is made.

    Once the interim charging order is granted and recorded with the land registry, a hearing date will be set to allow the debtor the opportunity to object to the final charging order. At the hearing the court should grant the final charging order unless the debtor can provide evidence to oppose the decision, such as the application being disproportionate to the amount of debt owed.

    The final charging order will then be registered with the land registry, ultimately securing the debt against the property. This means that once sold, the debtor must pay you back out of the proceeds of the sale.

    The process is similar when obtaining a charging order over stocks and shares. In this instance the information would be obtained from Companies House rather than the land registry.

    While the charging order itself secures the debt, it is not a means of forced payment so it doesn’t necessarily result in the debt being recovered straight away as the funds cannot be received until the asset is sold.

    There is no quick-fix method to recovering debt, but charging orders are a useful tool to put pressure on the debtor to release the charge, particularly if they are wishing to refinance or sell their property.

    For more information on recovering outstanding debt through a charging order please call Amy Richardson on 0161 761 8061 or email amy.richardson@whnsolicitors.co.uk