PART 2
LEGAL
LEGAL STUFF, TIPS AND USEFUL ADVICE
Charging Orders
What is a Charging Order?
It is an order of the court placing a 'charge' on your property, such as a house or a piece of land. The charge will be the amount you owe, plus any interest and legal costs. The charging order seldom means that a creditor can demand their money immediately, but it 'ring-fences' it for the future. A creditor can only apply for a charging order if they have first filed a County Court Judgement (see below), and the terms of that judgement have subsequently been breached.
A charging order is a creditor's equivalent of an Exocet missile: sudden, precisely targeted and potentially deadly. But unlike being hit by a missile, where your demise is summarily swift and relatively painless, the charging order behaves more like a medieval torturer, ensuring that your suffering will linger for as long as possible.
A charging order is applied in two parts.
1/ The Interim Charging Order (Notice of the impending order, allowing you 21 days to respond. Although in most cases, unless you are able to pay up in full, there will be very little you can do to prevent it sticking.)
2/ The final Charging Order
How does it work?
A charge on a property means that if your property is sold the charge will be paid first, before you (or any other creditors) receive any proceeds of the sale. You should note, however, that a charging order does not compel you to sell your property.
If there is already a charge / s on your property when the charge is registered, for example, arising from a mortgage, a secured loan or a previous charging order, then that charge /s will be paid first.
AN IMPORTANT NOTE:
If you go bankrupt and the equity (beneficial interest) is taken up with a charging order / s, then the Official Receiver will have no interest in selling your property, because it will not realise a profit if sold. So to this extent, a charging order is not necessarily a bad thing, because it can actually prevent your home form being sold. If you think this may apply to you, take advice from your local Citizens' Advice Bureau or the CCCS. You may need to spell it out in detail, because they may not have encountered the scenario before.
When can a creditor apply for a charging order?
They can apply at any time after they have obtained a judgement. However, the judge who considers the application will not make an order unless you have:
- Failed to pay the amount of the judgement when it was due
- Failed to pay one or more of the instalments due under the terms of the judgement
THIS IS WHY IT IS SO IMPORTANT NOT TO IGNORE COURT JUDGEMENTS. A 'FOR PROFIT' DEBT MANAGEMENT COMPANY ADVISED ME TO IGNORE A JUDGEMENT - A REASONABLE SUM THAT I WAS PREPARED TO PAY. ULTIMATELY THIS BAD ADVICE COST ME MY HOME, BECAUSE IT RESULTED IN A CHARGING ORDER OF £30,000!
NB
If you own stocks or shares or other traceable assets, the court can also put a charge on these in much the same way as on property.
The only person who can seize your goods or claim a right to enter your home is a licensed bailiff. And even then, a bailiff must have an order from the County Court to do so, in which case you will have received a summons. And unless they are working on behalf of the Inland Revenue or Customs and Excise, the bailiff will also write to you personally informing you of exactly when he or she intends to visit you and what action you can take in the meantime to put them off. In most cases they are the least of your worries. So long as you don't bury your head in the sand!
If you receive a County Court summons and you ignore it, the case will be heard in your absence, and it will seldom work in your favour. Whenever possible, always attend a court hearing, even if you do not intend to defend the claim. (Or at the very least send a letter to the court outlining your personal circumstances.) It is also possible to have a representative from the Citizens' Advice Bureau to accompany you. The service is free, and they tend to be very knowledgeable, but also very busy - so be sure to contact them as soon as you receive your summons.
Change your phone numbers. And keep them ex-directory. This is not necessarily to evade your creditors, but it puts you back in control as to when and if you choose to speak to them (you may prefer to communicate in writing). Give your new numbers to nobody except trusted friends and family (and clients if you have a business). If you're running your own business, it can be a hassle to change numbers, but it is definitely worth it for the sake of your health. And I don't say this lightly. Debt collection companies rely on fear and ignorance to achieve their ends, and the telephone is the their most reliable means of applying intimidation. You will sleep better, and you won't flinch every time the phone rings.
Telecoms companies will not charge you to change your phone numbers (landline and mobile), so long as you don't do it more than once in six months, and even then the charge is minimal.
Tell them that you are receiving nuisance calls.
doorstep callers and loan sharks
What to do:
Karl Marx
An important note
The Office of Fair Trading issues the following guidelines to banks and debt collection companies. Note the word guidelines!
Creditors or their representatives must not:
- Bring unreasonable pressure to bear on you in default of payment
- Falsely claim that criminal proceedings can be brought for non-payment
- Falsely imply that they may legally seize property or take other action without going to court
- Impersonate a court or any other official person, by letter or by telephone
- Make nuisance visits and phone calls, or use abusive or threatening language in person, by letter or by telephone
- Leave messages for you to contact someone urgently with no explanation
- Contact you at work, or the customer's employer with intent to create embarrassment and create fear of dismissal
- Wait outside your place of work on payday
- Park outside your door in a vehicle marked 'Debt Collectors' !!!
- Call on your neighbours, pretending to believe the neighbour is you
- Send insufficiently addressed postcards
Regardless of guidelines, debt collectors will do all of the above and more. Be warned! Tell them firmly that you are aware of your rights. They rely on fear and ignorance of the law to achieve their ends. When you let them know that you will not be intimidated, they'll move on to easier pickings.
Some creditors will attempt to frighten you with threats of bailiffs, repossession, attachment of wages, letters to your boss and doorstep callers. They will phone you at work, and at weekends. Although you have committed no crime, they will attempt to make you feel like a common criminal. They will even demand that you tell them what you've done with 'their' money.
The Golden Rule:
Maintain your dignity and keep matters in perspective. Always remember: these people who are calling you day and night on the telephone are recruited from the ranks of life's losers: they are unskilled drones, working unsocial hours out of crowded call centres for poor wages. They have supervisors breathing down their collars to get results. And I'm convinced that as part of their training they're actually psyched up to believe that they are dealing with the scum of the earth. How else could any self-respecting human being stoop to distressing people for a living? Because that is what their job amounts to. I've read of people committing suicide as a direct result of being hassled on the telephone by debt collectors. And I can believe it. Don't let them wear you down. They aren't worth it. Long after you're back on your feet, they'll still be languishing in call-centre hell!
Remember: you are not obliged by law to speak to anybody. Ever!
Loan Sharks
If you default on payments to a 'private' lender, the chances are you will receive threats of violence, or other forms of extreme intimidation. Make them a priority over your legitimate creditors. Offer what you can afford and stick with it. If you still feel threatened seek advice from the police.
You cannot be prosecuted in the Criminal Court because you have not paid a consumer debt. Creditors who try to make you think you can are breaking the law.
If you feel you are being harassed, you can take the following action:
Write to the creditor and tell them that you are familiar with the terms of Section 40 of the Administration of Justice Act. Demand that they take immediate steps to avoid future harassment by their representatives. If you have received threatening telephone calls, tell them that you will record any future calls and send a transcript to the local Trading Standards Officer. Tell them to contact you by letter only, and that they should confirm their agreement to this in writing.
If you feel the need to make an official complaint regarding a creditor or debt collector, this should firstly be made to your local Trading Standards Officer. If Trading Standards will not act, contact the Office of Fair Trading. Do it in writing and send copies of all letters to your creditors and any debt collection companies and / or solicitors acting on their behalf. Also send copies to your MP, and let your creditors know that you're doing all of the above. Take the trouble! Get tough! Enjoy the fight!
If you lack confidence with writing, ask a friend or family member to help you.
Debt collectors habitually break the law, because they know they can get away with it. But when they know the finger is on them, like all cowards, they back off!
Dealing with the Inland Revenue and HM Customs and Excise
Unlike normal creditors, the Inland Revenue and Customs and Excise can exercise special powers to retrieve their dues. If you don't pay up they will take you to court as a matter of course. It's not a question of if, but when! On top of this, their bailiffs can break into your home or offices to obtain files and / or seize goods — without a prior court order!
Unlike normal creditors, they are not open to offers of extended payment plans to clear arrears. It's usually all or nothing, or at the very least they will, at their discretion, allow you to clear arrears in two or three significant payments, paid on consecutive months.
If you fail to pay your VAT after repeated reminders, a bailiff will call at your place of work or your home unannounced and earmark goods or equipment for seizure. If payment isn't received within a prescribed period, they will return with a truck! Be warned!
If you're intending to apply for an IVA or file for bankruptcy, then inform them of your intention; but if you're merely playing for time they'll be back!
Bailiffs and other debts
With most debts, bailiffs are involved only if you can't come to an arrangement to repay a creditor, and then only after your case has been to court.
Although you may believe bailiffs are allowed to force their way into your home, and some bailiffs may give you this impression, this is not normally the case. Bailiffs may only force entry into your home if they have been inside your home for the same debt on an earlier occasion.
If you let a bailiff into your home, they will usually take 'walking possession' of some of your belongings. This means that if you cannot negotiate acceptable payments, with the bailiff, or you miss payments that you have previously agreed with the bailiff they can legally force entry into your home and take those items away.
That said, if you never let the bailiff into your home, they will never be able to take 'walking possession' of your belongings. They will, however, be able to take belongings outside your home, such as a car or motorbike — if they can find them!
For most types of debt, a bailiff will not take essential household items, such as your bed, cooker, fridge and most furniture, although he may well take your television or other 'non-vital' items.
County Court bailiffs
If you have a county court judgment (CCJ) and you don't make the payments as ordered, the creditor can ask the court to issue a 'warrant of execution'. This will involve county court bailiffs. But you can ask the court to stop them by filling in a form at your local county court, with a statement detailing what you can afford to pay.
County court bailiffs also carry out evictions after possession proceedings. This is the main situation in which you cannot physically stop bailiffs from coming into your home. But you can apply to the court to stop the bailiff if you believe you have grounds for appeal. See your local Citizens' Advice Bureau.
County Court Judgements (CCJs)
What should I do if I receive a County Court Claim form?
This information relates to England and Wales. If you live in Scotland see your local Citizens' Advice Bureau.
If you receive a County Court Claim Form you aren't legally required to attend Court, but you do need to reply punctually to all correspondence to ensure the Court takes your situation and views into account.
The Claim Form will arrive by post, together with 'Admission' and 'Defence' forms. You should complete and return one of these forms within 14 days.
Do not feel pressured into offering to pay more than you can afford.
Return the completed Admission form to the address on the accompanying 'Acknowledgement of Service' (not to the Court). If your offer is accepted, the creditor will ask the Court to make a Judgement and the Court will write to you. You will then receive a form marked 'acceptance of offer' showing how much you have to pay and when you have to pay it. If the total owed is less than £5000 then interest will normally have been stopped.
IF YOU WANT TO DISPUTE THE CLAIM (known as 'Defending the claim'):
Complete the 'Defence' form with details of your reasons for disputing the claim. Return the completed form to the Court. If you need longer than 14 days to prepare your defence, complete the 'Acknowledgement of Service' form and send it to Court within 14 days. You will then be allowed a further 14 days to complete and return the 'Defence' form.
A hearing will then be arranged at your local Court.
You must attend the hearing.
If you do not reply to the Claim Form, the creditor will ask the Court to enter 'Judgement in Default'. Since the Court will not have details of your circumstances, it may set a high amount for you to pay. Where the rate of payment has been set without a hearing, then either the creditor or the debtor can apply for re-determination by a District Judge. You must apply within 14 days of the Judgment and no fee is payable.
When can a creditor take you to Court?
If you are behind with the payments you agreed when you first took out a credit agreement, even if you are making reduced payments, your creditor can take you to Court by issuing a County Court Claim form. The cost of any resulting Court action will be added to the amount you already owe.
What if you can't afford to pay the amount set by the Court?
If you can only afford to pay part of the amount ordered by the Court, you can make an 'Application to Vary an Order' using Form N245 which can be obtained from any County Court.
Complete form N245 and send it to the Court. There is a fee of £30, which can be waived in cases of hardship.
If you cannot afford to make any payment whatsoever to the creditor, you can make an 'Application Notice' to have the judgement set aside using form N244 which can be obtained from any County Court. Send the completed form to the Court together with your budget. There is a fee of £60, which can be waived in cases of hardship!?? But surely...Oh, never mind.
The proceedings may be transferred to your local Court and a hearing date will be set.
You must attend the hearing.
What effect will a Judgement have on my ability to obtain credit?
County Court Judgements (CCJs) will be recorded on your Credit Reference Files maintained by Credit Reference Agencies (contact details below). The entry on your file will almost certainly affect your ability to obtain future credit, as most lenders check these files before granting credit. Credit Reference Agencies record only factual information, such as defaults, CCJs, bankruptcies, missed, late or reduced payments, etc. They do not 'blacklist' individuals.
How can you find out what is on your credit file?
You can obtain a copy of your credit file by contacting one of the credit reference bureaux listed below: Equifax; Experian; CallCredit. You must apply in writing / email, and there is a small fee charged for this information.
What happens if I fail to make payments under a CCJ?
If you do not make payments under a CCJ, the creditor can apply for:
- An Attachment Of Earnings
- A Charging Order - so that the debt can be secured against your home or property
- A Warrant of Execution, enabling County Court Bailiffs to visit your home
NB
A creditor cannot take any enforcement action without first obtaining a CCJ. So it is essential that you respond to Claim Forms with an offer that you can afford to maintain.
What are County Court Bailiffs allowed to do?
Bailiffs are only used as a last resort. They have the right to seize goods to the value of the debt - plus costs. They will not take basic household goods but they may take your car if it's of sufficient value.
You do not have to let the bailiffs into your home. However, they can legally enter through any open door or window.
They can break in only if:
- They have entered previously for that particular debt
- They are recovering debts owed to the State (e.g. Income Tax or VAT)
- Even when bailiffs call, it may still be possible to negotiate satisfactory terms for payment with them. Or you can use Court form N245 to request that the Warrant be suspended and to make an offer that you can afford (there is a fee of £30 which you can apply to have waived in cases of hardship using Court form EX160)
How long can you be chased for a debt?
Most debts can be pursued for six years, in accordance with the Limitations Act 1980.
What happens if you owe money but have left the country?
If you move abroad, your creditors will, in theory, still chase you, but of course they'll have to find you first! If you have County Court Judgements, these won't be able to be enforced by foreign Bailiffs, but your creditors may attempt to recover the debt via local debt collection agencies. Bear in mind also that we live in a global financial village. The main credit agencies have offices in most European countries, and as modern banks are international institutions, and increasingly share information, it's only a matter of time before you pop up on a computer screen - somewhere.
Mortgage arrears
Contact your mortgage lender and explain your position. Try to reach an agreement to pay something extra each month to clear the arrears. Ensure that you are not paying unsecured creditors such as bank loans and credit cards instead of the mortgage. Contact. the CCCS or the Citizens' Advice Bureau.
Council Tax arrears
Non-payment of Council Tax can have serious consequences — such as imprisonment! So if you are behind with your payments it is important that you contact your Council Tax office as soon as possible and try to come to an arrangement to repay the arrears. They are usually fair and reasonable. Ensure that you are not paying unsecured creditors such as bank loans and credit cards instead of your Council Tax. If you are still worried, contact the CCCS or the Citizens' Advice Bureau.
Arrears with gas/electricity/phone bill
If you are in arrears with your gas, electricity or phone bill you can be disconnected, although you should be notified in writing before this happens. You should contact the company and try to come to an arrangement to repay the arrears. Gas and electricity companies are legally obliged take notice of customers in need and should allow you to pay back what you owe at a rate you can afford. If you are worried about being cut off, contact the CCCS or the Citizens' Advice Bureau.
Attachment of earnings
An attachment of earnings order means the Courts can order money to be stopped from your wages to pay a debt. They can only do this if you are in paid employment, and not if you are self-employed, unemployed or in the armed forces.
Before a creditor can ask the court to issue an attachment of earnings order, the defendant must be:
- In arrears with at least one payment
- Must owe £50 or more
Debts to creditors other than banks
If you operate your own business, it is likely that you will owe money to suppliers.
Unlike the banks, the typical small supplier will not hesitate to take you to court. This is understandable because, unlike larger organisations, they will feel the pain when you fail to pay up. And they are also likely to view your non-payment as a breach of personal trust. If you have a personal relationship with a supplier, it may be possible to come to an informal arrangement to pay off arrears at a later stage.
Larger companies will recover their debts through much the same channels as the banks — i.e. debt collectors and solicitors.
If you do an Internet search for 'CCCS' you are likely to come across a 'for profit' debt management company who call themselves C.C.C.S. (Credit Card Counselling Service) What an extraordinary coincidence that they should share the same acronym! Do not confuse this company with the Consumer Credit Counselling Service.
Opening a new bank account
Whatever your credit status, most banks will offer you a basic cash account with ATM card, direct debit and standing order facilities. In the early days, don't expect to get a chequebook or an overdraft facility. But once you've demonstrated that you're banking responsibly, you will, in time, be offered normal banking facilities.
Barclays. Includes Link cash card, phone banking, d/d and s/o
Nationwide. Includes Link cash card, phone banking, d/d and s/o
Co-Operative. Includes VISA Electron, phone banking, Internet banking, d/d and s/o. This is the BEST deal, firstly because of the Internet banking, but especially because ofthe VISA card, which saves you having to draw out cash whenever you shop.
DO NOT PAY ANYONE TO OPEN A BANK ACCOUNT ON YOUR BEHALF. ANYONE WHO OFFERS THIS SERVICE IS RIPPING YOU OFF!
DO NOT PAY ANYONE TO 'REPAIR' YOUR CREDIT STATUS. ONLY YOU AND / OR TIME CAN ACHIEVE THIS.
Some useful contacts:
| Office of Fair Trading | www.oft.gov |
| Citizens Advice | www.citizensadvice.org.uk |
| Equifax | www.equifax.co.uk |
| Experian | www.experian.co.uk |
| Call Credit | www.callcredit.plc.uk |
| Money Advice | www.m-a-a.org.uk |
| Samaritans | www.samaritans.org.uk |
| DWP | www.dwp.gov.uk |
| CCCS | www.cccs.co.uk |
| The Insolvency Service | www.insolvency.gov.uk |
| Bankruptcy Association | www.theba.org.uk |
| British Banking Association | www.bba.org.uk |
| Business Debt line | www.bdl.org.uk |
| Community Legal Service | www.cls.org.uk |
Benefits
Where to get help:
To find out whether you're entitled to benefit and, if so, how much, contact your local Citizens' Advice Bureau or local council welfare rights office. They are able to offer expert and impartial advice. If you're new to this, do not neglect to claim out of misplaced pride. You've paid your dues over the years, and the welfare system exists as a safety net to get us through the hard times. Use it! Don't abuse it!
Re-housing
If you lose your home, and you have nowhere else to go, your local council has a legal obligation to re-house you. However, due to the fact that successive governments have disposed of the bulk of council housing stock to boost their coffers, the UK is in the grip of a dire, and entirely predictable, state-owned housing shortage.
Depending on what area of the country you live in, this means that if you are assessed as 'homeless' you are likely to end up in 'temporary accommodation' (i.e. a sleazy bed and breakfast or hostel) prior to being re-housed. This is not for the sensitive or faint-hearted. Be warned.
NB
I've heard of people in this situation agreeing to live in a hotel, signing in every night, but not actually living in the hotel. They instead stay with relatives until they are re-housed, which is usually sooner than later, because they are at the very top of the housing needs list. It happens.
Renting in the private sector
Avoid, if you can, letting agencies, because they will inevitably do a credit check on all applicants. They'll even pass the cost of the check onto you! If you show up as a 'high risk' prospect, then you'll be: a/ turned down without further discussion, or b/ asked to produce up to six months' rent in advance, which they will retain as a 'risk deposit'.
An alternative way of renting
Far better avoid the agencies altogether. Scan the rental pages for people who are letting their property privately (i.e. not through an agent). They're easy to spot, because they're usually just a brief line ad. This is not to say they won't do a credit check, although most won't. Alternatively, you may wish to 'come clean' about your 'situation'. People can be very reasonable, and many landlords just don't care - so long as they get their rent. It's the letting agencies that care, because they need to cover their arses. However (in many cases, though not all) private landlords will require references from a previous landlord. If you don't have any references, simply ask a friend or family member to supply a reference in their capacity as your 'landlord'. Where there's a will...
A note on rent relief
Once upon a time, if you became unemployed, or were forced by other circumstances to live on income support, the government would pay the interest on your mortgage. Alas, no longer - at least not for the first 37 weeks! The last Tory government saw to that, and the present administration has been happy to stick with it.
However, if you qualify for help with all or part of your rent (which is very likely if you're bankrupt and have lost your means of livelihood), the government will pay from day one. So if you can muster a deposit to get a foot on the private sector ladder, you can then apply for immediate rent relief from your local council. If this is all new to you, do not be afraid to apply if you feel you may be entitled. Also ask your Citizens' Advice Bureau.
And finally...
Just in case you're feeling a teensy bit guilty about not paying your debts, remember there's a wide gulf between desperation and greed. But don't take my word for it:
Open your eyes, and subscribe to Private Eye magazine — you'll see that banks and bankers rate among the biggest crooks on our planet. And the unforgivable factor is they aren't desperate — just plain greedy. Food for thought.
That's all for now. I sincerely hope you've found my report helpful.
Enjoy the rest of this great life!
Bob James
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