Homeowners in Debt

[AtheneNoctua]

I thought this was an interesting article. Especially since I heard David Kuo (who also works for the fool) saying yesterday morning on BBC London that he didn't think credit cards could do this because they are an unsecured loan.

www.fool.co.uk/news/your-money/2008/10/29/more-pain-for-homeowners-in-debt.aspx?source=uemfoleml0010 038

Any creditor can do this and it's always been this way. They have to first get a county court judgement and then apply to the court for a charging order.

If you borrow money from your mum and don't pay it back, she could do it. If you fail to pay off a finance agreement or don't pay the milkman, they can do it. It's nothing new. Once the creditor has a charging order, it then becomes a secured loan, because the debt is secured against your property. I'm not sure why it is being touted as a new problem for homeowners.

I guess the article is more about a sudden uptake of the right to do this rather than a change in any law. But, there might be an element of sensationalist reporting.

Yes as you say charging orders been around for eons of time, think they just like frightening everybody!

The article says that banks are obtaining charging orders only after one month of missing payments. That is a bit drastic.

I am not familiar with enforcement procedure in the UK but I did google it. It seems to me that the bank must first obtain judgment against the borrower and the borrower has failed to make payment of the judgment instalments: Her Majesty's Court Service website

Reading this, I don't think it is as simple as a borrower failing to make one credit card minimum payment. The borrower must have actually been brought to court, the bank obtained judgment and borrower continues to default on the judgment debt before the lender can obtain a charging order.

Article is potentially misleading.

Quite. And there is no way that any judge would give judgment to a creditor because of one missed payment, especially if the debtor attends and makes an offer to make up the defaulted payment. This is just scaremongering.

And for non-homeowners, the creditor can get an attachment of earnings under a similar procedure (i.e. get judgment first, then apply to enforce), but the article doesn't seem to be as bothered with that.