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Ford

Charging Orders - discussion

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There is very much unlikely to be any mileage in such an argument. It's important to consider that a charging order is a mechanism to allow the further enforcement/execution of a county court judgment. It has little bearing on the whole secured/unsecured loan argument.

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There is very much unlikely to be any mileage in such an argument. It's important to consider that a charging order is a mechanism to allow the further enforcement/execution of a county court judgment. It has little bearing on the whole secured/unsecured loan argument.

 

 

 

Correct. People need to distinguish between the CCJ and the original loan.

 

A counter claim and FCO heareing would not be possible.

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I cant see why this is the case though, surely you would have a case of unjust enrichment against either the original lender or the dca(depending on who is going for CO) given that the original agreement was an unsecure credit at higher interest. They are seeking to make it a secured credit, therefore you should be due the interest differential back.

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I cant see why this is the case though, surely you would have a case of unjust enrichment against either the original lender or the dca(depending on who is going for CO) given that the original agreement was an unsecure credit at higher interest. They are seeking to make it a secured credit, therefore you should be due the interest differential back.

 

 

 

The Claimant secures the CCJ. Not the original loan which is terminated by that point...

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But they still securing the amount of the unsecured loan that is outstanding, so the effect is more or less the same. Add to this the addition of statutory interest (that doesn't apply to a CCA judgement debt where there's no charging order) and it makes it about as unfair as it can be for a debtor with property as against one without.

Edited by OnMyWayOut
Addition

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Statutory interest should not accrue on a charging order that has come out of a breached CCA regulated agreement either.

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The judge told me when I argued this that 8% was a better deal than the contractual rate!

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The judge told me when I argued this that 8% was a better deal than the contractual rate!

 

The judge got the law wrong. It simply cannot be applied post-judgment on CCA debts at all. It's prevent as per The County Courts (Interest on Judgment Debts) Order 1991 - Section 2(3)(a).

 

In addition, there are many arguments that can be used to prevent contractual interest accruing post-judgment on CCA judgments too - especially those that become a charging order.

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That's exactly the bit I used to argue against the interest (as you advised me at the time) and he basically ignored my argument.

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I've got another older CCA CCJ that has been paid as per the order since it was applied (in fact I'm paying a higher amount due to pressure from the creditor) five or six years ago. Will they be able to get a charging order after October or do the changes only affect new CCJs after the implementation date?

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That's exactly the bit I used to argue against the interest (as you advised me at the time) and he basically ignored my argument.

 

Sorry to learn that. Just goes to show how inept some Judges can be.

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The judge got the law wrong. It simply cannot be applied post-judgment on CCA debts at all. It's prevent as per The County Courts (Interest on Judgment Debts) Order 1991 - Section 2(3)(a) .

 

If it is law that Statutory interest cannot be added on CCA debts, how do debtors go about getting the interest removed where a Judge has added it?

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If it is law that Statutory interest cannot be added on CCA debts, how do debtors go about getting the interest removed where a Judge has added it?

 

the 91 order is by virtue of s74 cty courts act. no post j stat interest on a cca regulated judgment debt and no post j stat interest on any j debt below 5k. poss options? appeal/set aside the judgment? or, pay judgment sum only. they would then need to pursue payment of the since added interest sum by way of enforcement and so such enforcement could be disputed as such? any more options? time order re enforcement? or...?

Edited by Ford

IMO

:-):rant:

 

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I've recently read the MOJ paper that outlines why it is recommending a threshold limit of £1000 for debts able to be pursued by a CO (instead of the £25,000 recommended by the OFT) and, whilst it refers to the benefit of high interest rates creditors have under the unsecured banner, it still ignores the unfairness of the creditor being able to also gain "security" for the debt later on with a CO.

 

Hopefully, the OFT is as unimpressed as I am over this £1000 limit and is seeking other ways to restrict creditors pursuing CO so easily?

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.........

Hopefully, the OFT is as unimpressed as I am over this £1000 limit...?

 

they seem to be, as they say '....and that many charging orders were used to secure relatively small amounts of debt, sometimes below £5,000' seems to imply that they regard anything below 5k to be particularly unfair/disproportionate/oppressive.

but what will they do?


IMO

:-):rant:

 

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it still ignores the unfairness of the creditor being able to also gain "security" for the debt later on with a CO.

 

It's not unfair. It's vital to consider the money owing being under a judgment debt - rather than what was once an unsecured loan. I know this seems a little harsh to say, but CO's are an enforcement measure via the court system. If they were made any more difficult for creditors to obtain we will see a MASSIVE increase in bankruptcies being applied for. It's a difficult line to tread for sure, and I welcome the OFT's stance with RBS/Natwest; CO's should be used proportionately.

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If they were made any more difficult for creditors to obtain we will see a MASSIVE increase in bankruptcies being applied for..

 

Forgive me, Sequenci,, but I feel this a total red herring as there is absolutely no evidence to support this is what would happen with a threshold on CO's. It's just an assumption that isn't really backed up by facts.

 

The reason Charging Orders are sought, primarily, is because they offer priority to the creditor over the debtors other creditors at a fairly cost efficient price. Bankruptcy does not guarantee the creditor any priority (as all debts are included) so its a far riskier and involved strategy for a lot larger outlay. Altering CO thresholds won't affect that fact. What thresholds would do, I believe, is to see creditors writing off the debt for tax purposes and selling off the debt for debt collection (as happens with the majority of bad consumer debt anyway) as its a better "business" solution than going for bankruptcy (part of the "business" reason being the high interest rates these loans have attracted!)

 

With regard to the opinion of the "unfairness" of CO's on consumer debt; even the MOJ is in agreement that they are. In their proposal paper regarding introducing threshold limits for CO's they state;

 

"Option 4: Introduce a minimum threshold on all orders for sale in Consumer Credit Act applications

Introduction of a threshold would remove the threat of eviction from thousands of debtors with charging orders. It would also reduce the ability of aggressive creditors to threaten and intimidate debtors who have already paid higher premiums for what they believed to be small unsecured debts. Using rules to specify that the threshold only applies to consumer credit debts would tackle the chief unfairness that people can lose their homes for what was originally unsecured borrowing but ensures that orders for sale are still available as a tool for individuals seeking to recover larger debts through the civil courts."

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A number of creditors are switching their strategy from charging orders to bankruptcy. Where the equity position is comfortable, they are more than willing to take the risk of not getting priority on the debt. After all, the first debt to be paid out in a bankruptcy is the petition costs so it is effectively a zero cost option for them. It's ideal for the smaller debts as getting an order for sale will be next to impossible, but a bankruptcy order - followed by a sale of the property by the trustee - is a slam dunk. That's basically why a modest limit on charging orders has been implemented - to stop an explosion in bankruptcies.

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A number of creditors are switching their strategy from charging orders to bankruptcy.

 

Evidence please.

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Applications for charging orders, which give creditors the rights to the income from the sale of a debtor’s property, were down 22% to 77,856 last year, from 99,961 in the 12 months to 30 June 2011.

 

Orders of sale, which force debtors to sell their property for the benefit of their creditor, fell 23% from 426 to 329 over the same period.

 

Debt recovery tools related to property were complicated if a Payment plan was granted.The trend will change back now the law has changed and application for ICO can be done once judgment is passed...they will spiral in 2013.

 

http://www.credittoday.co.uk/article/14697


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Forgive me, Sequenci,, but I feel this a total red herring as there is absolutely no evidence to support this is what would happen with a threshold on CO's. It's just an assumption that isn't really backed up by facts.

 

It's not an assumption, I can assure you. I do this for a living and I'm seeing more and more come through every day. It would be great to have some tangiable data, I'm sure it can be found somewhere - I'll try and take a look. I have all the court data but not the IS data, which I'm sure I must be able to get. I'll look into it!

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Sequenci - Unfortunately, if your view is based solely on you own experience it can only be an assumption until you have the complete data to back it up.

 

Take Gaston's post for instance, regarding Bankruptcy by a creditor he states,

 

"It's ideal for the smaller debts as getting an order for sale will be next to impossible, but a bankruptcy order - followed by a sale of the property by the trustee - is a slam dunk. That's basically why a modest limit on charging orders has been implemented - to stop an explosion in bankruptcies."

 

Its easy to assume from that statement that the "modest" limit is, indeed, to stop the "explosion" in bankruptcies". But until recently there hasn't been any limit, modest or otherwise, on CO's - so why hasn't there been an bankruptcy explosion previously given how ridiculously easy Gaston says it is? The answer, IMHO, is because Bankruptcy is a far more involved process for the creditor and most would shy away from this step as, indeed, most shy away from trying to secure CO's.

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Sequenci - Unfortunately, if your view is based solely on you own experience it can only be an assumption until you have the complete data to back it up.

 

It's based upon anecdotal evidence, I work very closely with many of the national debt advice charities, the government and the Insolvency Service. We're seeing an upward trend. Well, at least we *have* been. I've no idea what the changes to the Tribunals, Courts and Enforcement Act will bring us. It's obviously going to be far easier for creditors to get their charge, so I'm assuming this mechanisim will be a bit of a no-brainer.

 

Its easy to assume from that statement that the "modest" limit is, indeed, to stop the "explosion" in bankruptcies". But until recently there hasn't been any limit, modest or otherwise, on CO's - so why hasn't there been an bankruptcy explosion previously given how ridiculously easy Gaston says it is? The answer, IMHO, is because Bankruptcy is a far more involved process for the creditor and most would shy away from this step as, indeed, most shy away from trying to secure CO's.

 

It's WAY more expensive for creditors for sure. And also (and this is probably the key reason why CO's are likely to be prefered) they may not get a decent return as any return from the bankruptcy would be split between all creditors.

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