Recovering unpaid debts can be one of the most frustrating challenges for individuals and businesses alike. Even after obtaining a County Court Judgment, payment is not guaranteed. Some debtors simply ignore judgments, while others claim an inability to pay despite owning valuable assets. In England and Wales, one of the most effective enforcement tools available to creditors in these circumstances is a charging order.
A charging order allows a creditor to secure a judgment debt against property owned by the debtor. While it does not always result in immediate payment, it can significantly strengthen a creditor’s position and protect their ability to recover what they are owed. Understanding how charging orders work and when they are appropriate is essential for making informed enforcement decisions.
What is a charging order and how does it work
A charging order is a court order that places a legal charge over a debtor’s property, most commonly land or real estate. It is typically used where a creditor has already obtained a County Court Judgment or High Court Judgment and the debtor has failed to pay.
Once the charge is registered, the debt becomes secured against the property in a similar way to a mortgage. This means that when the property is sold or refinanced, the creditor’s debt must usually be paid from the proceeds after any prior secured charges.
The charging order process in England and Wales involves two stages. The creditor first applies for an interim charging order. This is usually granted on paper without a hearing. The interim order temporarily secures the debt and prevents the debtor from disposing of the property without notice.
The court then lists a hearing to decide whether a final charging order should be made. At this stage, the debtor has an opportunity to raise objections. If the court is satisfied that it is fair and proportionate, it will make the charging order final.
Charging orders can be made against various types of property, including residential homes, buy to let properties, and in some cases jointly owned property. Where property is jointly owned, the charge usually attaches to the debtor’s beneficial interest rather than the entire property.
Why charging orders are a valuable enforcement tool
Charging orders are particularly valuable because they provide long term security for the debt. Unlike some enforcement methods, they do not rely on the debtor’s cooperation or ongoing income.
For many creditors, especially businesses, charging orders offer strategic advantages.
They are effective where the debtor has assets but limited cash flow. They prevent debtors from selling or refinancing property without addressing the debt. They can apply pressure on debtors who wish to deal with their property. They often lead to settlement negotiations. They protect the creditor against the debtor becoming insolvent.
While a charging order does not automatically result in payment, it changes the balance of power. Debtors who previously ignored judgments often become more willing to engage once their property is affected.
Charging orders can also be combined with other enforcement methods. For example, a creditor may secure the debt with a charging order while also negotiating payment plans or considering further enforcement options if appropriate.
Limitations and considerations when using charging orders
Although charging orders are powerful, they are not suitable in every case. Creditors must carefully assess whether this method aligns with their objectives.
One important consideration is timing. Charging orders are often a long term enforcement tool. If the debtor has no intention of selling the property in the near future, recovery may be delayed. In some cases, creditors can apply for an order for sale, but courts in England and Wales are cautious about forcing the sale of residential property, particularly where it is the debtor’s family home.
Another consideration is priority. Charging orders rank behind existing secured charges such as mortgages. If there is little equity in the property, recovery may be limited or uncertain.
Courts also retain discretion when deciding whether to make a final charging order. Factors such as the size of the debt, the debtor’s circumstances, and whether instalment payments are being maintained may be taken into account.
It is also essential that the charging order application is handled correctly. Errors in procedure, service, or registration can undermine enforcement and cause unnecessary delay.
Because of these complexities, professional advice is crucial before pursuing this route.
When a charging order is the right choice
Charging orders are particularly effective in cases where the debtor owns property, has ignored other enforcement attempts, or where the creditor wishes to secure the debt while preserving the option of future recovery.
They are commonly used by businesses seeking to enforce unpaid invoices, lenders recovering loan balances, and individuals enforcing court judgments arising from contractual disputes.
In many cases, the mere existence of a charging order leads to payment without the need for further court action. Debtors often prefer to settle rather than allow a charge to remain on their property.
Conclusion and next steps
Charging orders are a highly valuable enforcement mechanism in England and Wales when used strategically and correctly. They provide security, leverage, and long term protection for judgment creditors, particularly where debtors hold property but refuse to engage.
However, charging orders are not a one size fits all solution. Each case requires careful assessment of the debtor’s assets, equity position, and wider circumstances. Poorly considered enforcement can result in delay, cost, and limited recovery.
At Penerley, we advise clients on the full range of enforcement options available and help determine whether a charging order is the most effective route. We manage the process from application through to registration and advise on next steps where payment is still not forthcoming.
If you have an unpaid judgment or are struggling to recover a debt, contact Penerley today to discuss how a charging order or other enforcement action can help you recover what you are owed.
