View from the bench | Enforcing charging orders where instalment payments are made

Charging orders are made in every county court in the country, every day, often in bulk, at speed, using reliable tickbox forms. Here in Swindon (an unappreciated centre of banking excellence - major local employer Nationwide Bank) we have been making interim orders on paper by the score and on Wednesdays we list hearings of final orders at about twelve to the half hour. It is so rare that anyone turns up, and when they do, we generally only have to reassure them that it won’t really make any difference to the debtor, but it gives the creditor some comfort and most creditors will be prepared to accept payment by instalments once they have their security: lenders who weren’t too concerned about a borrower’s ability to repay a credit card debt view payment by instalments sceptically when things have gone wrong and they want to protect their chances of getting a share of what is usually a family home. Debtors who do attend frequently complain that they want to make repayments, but the creditor has refused to talk to them. Heard it all before? Things are about to change.

New rules of the race

The Tribunals Courts and Enforcement Act 2007 makes two relevant changes to the Charging Orders Act 1979. Section 94, which came into force on 17 May 2012 (SI 2012/1312), inserts a new section 3A,which gives the Lord Chancellor the power to set thresholds for the imposition of charges, which may be different in different classes of cases.

These thresholds are to be set by statutory instrument. When set, these will direct the court’s existing discretion to refuse or permit a charge depending on the level of the debt.

More significantly, section 93 comes into effect on 1 October 2012. It amends section 1 of the Charging Orders Act 1979 to remove the protection from the imposition of a charging order in cases where instalment payments are being made. Previously, of course, the district judge’s checklist began with either a judgment for payment forthwith or a default on an instalment order, because the sum of money to be enforced has to be due, and an instalment order postpones the date on which payment is due.

The creditor always wants to get his charging order before anybody else – he may not achieve an order for sale to enforce it immediately, but at least he knows he has a better chance of recovering what is due to him if he has the first charge, or at least the first after the mortgage.