Charging Orders: Myths, Benefits, Drawbacks & Challenges 

Dan Nailer
Dan NailerLegal Assessment Specialist
Updated on 28th May 2024

A charging order is a powerful legal tool used to secure a debt against a debtor's property. Curious to know how the process works?


Whether you're a creditor seeking to secure a debt or a debtor facing the prospect of a charging order, in this article we explain how charging orders work, what types of debts they can secure, common myths surrounding them, and what to do if you're facing or considering getting a charging order.

What is a charging order? 

A charging order is a legal mechanism used to secure a debt against a debtor’s property. It places a charge (or lien) on the property, giving the creditor a form of security for the debt owed to them. This means that if the debtor owns the property, such as a house or land, the creditor can register the charging order against it, thereby securing their interest in the property. 

How does a charging order work?

The process typically begins when a creditor gets a judgement against a debtor for an unpaid debt. This could be the result of a court judgment or a County Court judgement. 

Once the creditor has a judgement in their favour, they can apply to the County Court or High Court for a charging order.

The court will consider the application and, if satisfied, will issue a charging order against the debtor’s property. Once granted, the charging order is registered with the Land Registry

With the charging order in place, the creditor has several options for enforcing the debt:

  1. Choose to wait for the debtor to sell or remortgage the property, at which point the debt secured by the charging order must be paid off from the proceeds before the debtor receives any money. 

  2. Seek other enforcement measures, such as applying for an order for sale, which would force the sale of the property to satisfy the debt. 

What types of debts can be secured with a Charging Order? 

A charging order can be used to secure: 

  • Unsecured loans (personal loans, credit card debt, or overdraft facilities) 

  • Any debts for which a judgement has been obtained in court. 

  • Business debts including outstanding invoices or loans. 

  • Some tax debts owed to HMRC.

  • Mortgage shortfalls.

  • Personal guarantees.

Not all debts may be suitable for securing with a charging order.

Additionally, certain types of debts may have priority over others in the event of enforcement actions.

Therefore, creditors should seek legal advice to understand their rights and options fully. Contact us for a free case evaluation from our Legal Assessment Specialists. 

4 myths about charging orders

There are several myths surrounding charging orders, which can lead to confusion and misunderstanding. 

Charging orders result in immediate property seizure 

One of the most prevalent myths is that obtaining a charging order automatically leads to the forced sale of the debtor's property.

In reality, a charging order is a security interest placed on the property, but it doesn't mandate immediate sale.

Instead, it serves as a means for the creditor to secure the debt against the property, and actual enforcement, such as a sale, typically occurs later if the debt remains unpaid.

Charging orders guarantee repayment 

While a charging order secures the debt against the property, it doesn't guarantee full repayment to the creditor.

The creditor still needs to take further legal steps, such as obtaining an order for sale, to realise the value of their security interest.

Even then, the proceeds from the sale may not cover the entire debt, especially if there are other creditors with prior claims.

Charging orders apply to all types of debt 

While charging orders are a common method for securing certain types of debts, such as unsecured loans or judgment debts, they may not apply to all types of debt.

Charging orders always lead to property loss

Another misconception is that once a charging order is in place, the debtor will inevitably lose their property.

In reality, there are various legal avenues and defences available to debtors to challenge or delay the enforcement of charging orders.

Furthermore, creditors may explore alternative arrangements, such as installment payments or debt restructuring, to avoid property loss.

What are the benefits of getting a charging order?

A charging order provides a legally recognised interest in the debtor's property. This means that if the debtor owns property, such as a house or land, the debt becomes secured against it. This security interest gives the creditor priority over unsecured creditors in the event of the debtor's insolvency or bankruptcy.

Further, if the debtor sells or remortgages the property subject to the charging order, the creditor with the charging order will have priority in receiving payment from the proceeds. This can increase the likelihood of the creditor recovering the debt, especially if the debtor has multiple creditors.

What are the drawbacks of charging orders for debtors?

Once a charging order is granted, the debtor's property becomes encumbered by the creditor's security interest. This can limit the debtor's ability to deal with the property, such as selling or remortgaging it, without the creditor's consent.

Further, while a charging order itself does not force the sale of the property, it sets the stage for potential enforcement actions in the future.

If the debtor fails to repay the debt, the creditor can apply for an order for sale, which allows them to force the sale of the property to recover the debt.

Finally, having a charging order registered against their property can hurt a debtor's credit rating and financial reputation.

Can charging orders be challenged or set aside? 

Charging orders can be challenged or set aside under certain circumstances. Debtors may have grounds to challenge a charging order if they believe it was improperly obtained or if there are legal defects in the creditor's application. For example if: 

  • The creditor didn’t follow the correct legal procedures when applying for the charging order. 

  • The court considers equitable factors when deciding whether to grant or set aside a charging order (i.e. if the debtor can demonstrate that enforcing the order would result in disproportionate hardship or unfairness)

  • There are errors in the amount of debt claimed by the creditor or there are material irregularities in the conduct of the proceedings.

How can a solicitor help with charging orders?

For creditors 

Solicitors can: 

  • Provide guidance on the process of getting a charging order, including assessing the eligibility of the debt and the likelihood of success in obtaining the order. 

  • Assist in preparing the necessary documentation to support the application for a charging order. 

  • Represent creditors in court proceedings. 

  • Advise on the enforcement of the charging order, including pursuing further action to recover the debt secured by the order, such as an order for sale. 

For debtors 

Solicitors can: 

  • Provide advice to debtors on their rights and options regarding charging orders, including potential challenges or defenses that may be available.

  • Represent debtors in court, presenting arguments and evidence to support the debtor’s case to challenge or set aside an order. 

  • Negotiate with creditors to reach a settlement or repayment arrangement that may avoid the need for a charging order. 

Are there alternatives to charging orders for securing debts?

Common alternatives to charging orders include: 

  • Using guarantors or co-signers who agree to be responsible for the debt if the primary debtor defaults.

  • Personal guarantees from directors or business owners for commercial transactions. 

  • Taking fixed or floating charges over company assets. 

  • Including retention of title clauses in commercial contracts.

  • Taking debentures over company assets. 

  • Negotiating debt restructuring agreements, modifying repayment terms, or reducing the debt amount to facilitate repayment. 

What should I do if I am facing a charging order?

If you are facing a charging order, first speak to a money, tax, and debt solicitor.

They will review the details of the charging order, including the amount of debt, affected property, and any associated terms and conditions. 

If you dispute the debt or have concerns about the charging order, consider negotiating with the creditor. This could involve proposing a repayment plan, disputing the validity of the debt, or exploring alternative arrangements.

In some cases, it may be possible to challenge the charging order if there are legal grounds to do so.

What should I do if I am considering getting a charging order?

The main steps to obtain a charging order include sending an N379 Application for a Charging Order to the court, serving interim and final charging orders on the debtor and creditors (if applicable), registering the orders on the property title, and drafting certificates of service.

If you are considering getting a charging order, consult with a solicitor to discuss your objectives and assess the feasibility of obtaining a charging order in your case. They can guide you through the process and help you navigate any legal challenges that may arise.

What obstacles can make the charging order process difficult? 

If a debtor's property has multiple existing charges, there may not be enough equity available to satisfy all creditors. This situation can hinder the creditor's ability to recover their debt through a charging order.

Further, debtors can contest charging orders against their property, which can lead to costly legal hearings and further delays in the process.

What happens if a debtor has multiple charges on their property? 

Charges on a property are typically ranked in order of priority based on when they were registered. This means earlier charges have priority over later ones in terms of repayment from the proceeds of a property sale.

As such, multiple charges can reduce the equity available in the debtor's property. If the total value of the charges exceeds the equity, there may not be enough funds to satisfy all creditors. In such cases, later creditors may not receive full repayment or any repayment at all.

What happens if a debtor sells their property before a charging order is secured? 

When a debtor sells their property, ownership is transferred to the new buyer. This transfer occurs through a legal process, and once completed, the property no longer belongs to the debtor.

If a creditor has not yet secured a charging order on the property, their interest in the property is not legally recognised, and they cannot enforce payment from the sale proceeds.

In cases where the property is sold before a charging order is obtained, the creditor may need to explore alternative debt recovery methods. This could include pursuing other assets owned by the debtor, initiating legal proceedings, or negotiating a payment plan.

Charging orders are a powerful tool for creditors to secure debts against a debtor's property. They provide a legal mechanism to enforce payment and offer certain benefits, such as priority in receiving repayment from property proceeds.

However, there are drawbacks and challenges associated with charging orders, including potential obstacles in the application process and the debtor's right to contest the order.

Lawhive's network of money, tax, and debt solicitors can provide valuable assistance to both creditors and debtors facing charging orders.

If you are a creditor, a solicitor can guide you through the process of obtaining a charging order and preparing the necessary documentation. 

For debtors, our solicitors can provide expert advice on your rights and options regarding charging orders, including potential challenges or defenses available to you. They can also negotiate with creditors to reach a settlement or repayment arrangement to avoid the need for a charging order and minimise the impact on your financial situation. 

Contact us 

Whether you’re a creditor seeking to secure a debt or a debtor facing a charging order, our network of expert legal professionals is here to provide fast, affordable legal assistance tailored to your circumstances. 

Contact us today for a free case evaluation and quote for the services of a specialist lawyer. 

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