A creditor may seek to have the Court issue a Charging Order against a debtor’s house, land or other property so that an unsecured debt may be turned into a secured debt via a charge on the debtor’s property. In doing so the creditor is looking to protect its interests by securing the debt against the property in case the debtor should subsequently decide to enter an individual voluntary arrangement or declare bankruptcy.
Normally, the Court initially issues an Interim Charging Order to afford time for the debtor to challenge the debt or to reach an amicable agreement with the creditor in relation to discharging the debt. Should no such accommodation be reached, the court will in due course grant a Final Charging Order to the creditor enabling it to change the status of the debt to a secured debt.
If the debtor does not repay the debt to which the charging order relates, it is possible for the creditor to obtain an order for sale from the Court to force the repossession of the property, although this action is relatively rare. If the debtor discharges the debt, then the court will remove the charging order on a relevant application.