Many people assume that when judgment is given in a money claim, if the debtor does not pay the debt the court will automatically enforce the judgment. Unfortunately, this is not the case and a creditor faced with the situation of a debtor who will not pay the debt has a number of options for enforcing the judgment. Today, we look at charging orders.

Before starting any litigation, it is always worth checking whether the debtor has sufficient funds to justify the cost of pursuing court proceedings. It may be that the debtor owns property which does not have charges on the register as the mortgage is discharged. In this instance, the creditor needs to see whether there is sufficient equity in the property to consider applying for a charging order. A charging order is subject to any charges previously registered on the property.

This means that if a mortgage was in place before a charging order was granted, the mortgage lender’s security has priority. The mortgage lender’s interests come before those of the debtor and the mortgage lender can therefore sell the property if, for instance, the debtor defaults on repayments and the conditions for repossession and sale are satisfied. The mortgage lender does have a duty to sell the property for the best price reasonably available otherwise the sale itself can be challenged.

It is important to bear in mind that a charging order does not, by itself, release funds to pay a judgment debt. In order to satisfy the debt, a sale of the property to which the charging order is attached, will need to take place. If the charge holder needs the money without too much delay, they can apply for an order for sale of the property. The other option, which could take a long time, is that the creditor can wait for the debtor or the other creditors to sell the property. It is worth checking whether there are likely to be sufficient funds following a sale to pay the judgment creditor if there are prior charges.

For more information about how we can assist with enforcement of a judgment debt, please contact Quentin Bargate or Andrew Denny of Bargate Murray