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Repossession rates to rise

New Repossession Law puts Debtors at Risk

Writes Hazel Cottrell hazel.cottrell@consumerchoices.co.uk

The new law, allowing lenders to move against debtors faster, could lead to a great increase in repossession rates.

Debt advisors have warned that the introduction of a new law concerning “charging orders”, which will make it much quicker for loan providers, credit card companies and other lenders to take action against struggling debtors, could lead to thousands more people losing their homes.

Issuing a “charging order” allows creditors to force the homeowner to sell their home in order to pay back their debt. These orders therefore allow lenders to recoup their money by converting an unsecured debt to a secured debt.

Currently, these “charging orders” can only be issued once the debtor has already had a County Court Judgement issued against them for failing to meet their repayments and has since then fallen further behind on the payment instalments agreed when the judgement was made.

However, the new law, which is contained in the Tribunals, Courts and Enforcement Act 2007 but is yet to be imposed, allows the providers to issue a “charging order” and secure the debt as soon as the first CCJ has been issued, irrespective of whether or not the debtor is sticking to an agreed repayment schedule.

Alex McDermott, policy officer at Citizens Advice has concerns about the effect this law will have on repossession rates. He told the Observer: “There is likely to be a big increase in orders for sale if this change in the law comes into force, because once a charging order is in place, a lender is free to apply for an order for sale as soon as someone falls behind with payments on the loan secured against their home.”

Before the law is enforced, it is expected that a requirement will be added for a minimum debt of £1,000 before a “charging order” can be issued.

Chris Eagle, commercial manager at Credit Choices says “This law does have serious implications for those struggling with debts. The introduction of this law could see a great increase in the number of “charging orders” issued, especially from those lenders keen to secure their funds as a result of the credit crunch. As a result, many more debtors could find themselves forced to sell their homes. Visit our Debt Centre for help and advice on staying on top of your debts.”

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