News Index - Government Proposal on Credit Card Debt

October 2005

Finance experts are concerned over the Governments new proposals to tackle credit card debt. Their worries centre on the risk of homeowners being made homeless, forced by lenders who will turn to the courts to recoup their money.

The Department for Constitutional Affairs has plans to make it much easier for credit card firms, banks and shops to repossess debtor's properties if they fail to pay their debts. They can do this by seeking a "charging order" and it works by handing over the remaining cash to lenders when a property is sold off and the mortgage loan cleared. Figures now show that the amount of orders in 1999 where 13,000 and have risen to 45,000 in 2004.

A "charging order" would usualy be made only if a debtor fails to meet two consecutive payments under an agreed repayment plan but under new plans the orders can be made against borrowers who are keeping to their agreed payments. A charging order gives the lender priority over other unsecured debts, meaning this debt will have to be settled in full plus costs and interest when the property is sold.

To secure a "charging order" a creditor will seek an interim order with no notice required. A judge, when satisfied, can grant it without the debtor even being present although he/she must be told within at least 21 days of the final hearing.