The second stage in the charging order process is for the creditor to obtain a final charging order. At the hearing, the district judge will decide whether to make the interim charging order final, or to discharge it. S/he should take into account both the personal circumstances of the client and whether any of the creditors would ‘be likely to be unduly prejudiced by the making of the order’.
If the client wishes to object to the making of the final order, s/he can apply to have the hearing transferred to her/his local court. The client must also file at court and serve on the creditor written evidence stating the grounds of objection not less than seven days before the hearing. Any relevant documents (including a financial statement) should be attached. In many cases, debt advisers will want to present a defence, but in practice most district judges appear to make final charging orders automatically. However, if the client does wish to defend the charging order the following arguments could be used:
Some creditors believe they can apply for a charge at any time, so check if any of the instalment payments due under a judgment have been missed. If not, the court cannot grant a charging order.
Check if an application to redetermine/vary the judgment was submitted before the interim order was applied for.
If it was, the redetermination/variation should be dealt with before the charging order and, so long as the redetermination/variation is granted and the new payments maintained, the application for a charging order could fail. However, an instalment order made after the date of the interim order is no bar to the making of a final order.
Check if other creditors have been notified of the charging order application, as the charging order could unduly prejudice their rights and, therefore, should not be made final. District judges may accept this argument if, for example, an arrangement has already been made for an equitable distribution to other creditors, which will be overturned if a charge is made for this debt (to prevent an order for sale following failure to make payments). If the court has not directed that other creditors be notified of the charging order application, it could be argued that the client has been denied a fair hearing, as prejudice to creditors is one of the matters which the Charging Orders Act specifically requires the court to take into account. Alternatively, the district judge may adjourn while other creditors are notified; if none of the creditors lodge an objection this defence may fail.
The defendant is technically insolvent and thus a charge in favour of one creditor prejudices the rest. This would be the case if there was insufficient equity in the property to cover all the debts in full.
The debt is small compared with the amount of equity in the property.
