If you owe money to a bank or credit card company then there is a fairly well trodden route which these creditors go down to try to get their money back. In the event that the initial arrears letters and telephone calls do not get your account back on track then the creditor will firstly issue a Statutory Default Notice; a letter informing you that you are formally in breach of the terms of the agreement as laid down in the Consumer Credit Act 1974. A default notice has to be issued prior to the creditor taking further legal action against you.

Once the default notice has been issued then a creditor can commence action in the County Court to obtain judgment against you (known as a County Court Judgment or CCJ) for the outstanding debt plus any interest and charges accrued. Either before the CCJ route is taken, or at the same time, the creditor is normally also instructing debt collection agents to approach you directly to try to make payment.

In the event that a County Court summons appears in your post then you should try to do the following;

• Try to ensure the hearing is in a County Court local to where you live.
  Most creditors issue County Court summons via a single court irrespective of where you live. If you are many miles from the courts location then you should always seek to get the hearing moved to your local court. Simply ring the court identified on the summons and advise them that it is impractical for you to attend due to travelling distances and the court will usually reschedule the hearing. The impact of this is to delay the hearing while you obtain some professional debt advice on your rights and obligations.


• Attend the Court hearing to put your side of the case.
  If you do owe the money then it is almost certain that a CCJ will be issued against you. A judge has two courses of action available. The CCJ will either be for payment in full or via instalments (the monthly amount being based upon a means test of income and family expenditure). If you attend court then you may be treated more sympathetically and be allowed to pay in instalments.

Historically paying a CCJ by instalments has provided far more flexibility for a debtor (obviously a Payment in Full Order is impossible to satisfy for someone without the means or assets) and as long as payments are maintained then the creditor can take no further action. However for homeowners, failure to maintain monthly instalments or satisfy a Lump Sum Order means that the creditor can immediately apply for a Charging Order against the debtors? property. A Charging Order effectively stops the debtor selling the property, or indeed re mortgaging, without satisfying (paying in full) the debt identified in the CCJ. The creditor will put a notification on the Land Register advising all third parties of their prior interest in the property.

Obviously creditors like Charging Orders because they get paid in full at some time in the future. More and more creditors are aggressively pursuing a Charging Order strategy currently. High levels of personal debt in the UK have seen enormous sums being written off by the banks and Collections agencies are being tasked with minimising these losses in future.

The next stage of the Charging Order lobby has been to persuade government that a ?loophole? of some homeowners selling their property while repaying a CCJ in instalments and then not paying the creditor off exists. Currently a Charging Order cannot be applied if instalments are being paid on time. In the near future the Courts and Enforcement legislation, currently before parliament, could provide a mechanism for creditors to automatically get a charge against the debtors? property irrespective of CCJ payment terms.

A number of consumer organisations such as Citizens Advice are very concerned that one of the side effects of this legislative change will be to provide creditors with a new means of repossession or forcing sale of the debtors property (as long as the creditor can persuade a judge that it is in the interests of justice for possession to be granted). Safeguards are required in the proposed legislation to protect vulnerable people from losing their home where they are maintaining payments on a CCJ. It is likely that the new legislation will only apply for larger CCJ debts and a framework of minimum amounts is likely to be set under which a Charging Order cannot be applied for.