Credit card debt 'puts homes at risk'

05/02/2009

Homeowners could risk repossession if they fall behind on credit card or loan repayments, according to a new warning from Citizens Advice.

The organisation has noticed a growing trend of "charging orders" where lenders secure previously unsecured debts on houses.

Moira Haynes, spokesperson at Citizens Advice, told the Mirror that this means borrowers could risk losing their homes over relatively small credit card debts or missed loan repayments.

"There's currently very little protection for householders on orders for sale," she explained, highlighting that there are currently "no hard and fast rules" of how to approach such cases.

"In theory people could end up on the street for very small debts. But, in reality, that will rarely happen."

The newspaper highlighted the case of a reader who missed repayments on a £7,000 loan and was presented with a charging order on his property. However, with help from Citizens Advice, the man was able to convince the judge that demands for higher payments form his lender were unreasonable and has kept his home.

Ms Haynes added that as with any problems, falling behind on payments should be addressed as soon as possible. "Don't put your head in the sand," she said.

Commenting, EuroDebt director Kevin Still said: "We have seen a marked rise in the use of charging orders on judgment debts. This has been quite common amongst many of the debt purchasers, where they can play a waiting game having only paid a fraction of the face value of the outstanding balance from the original creditor.

"It now seems it is becoming more common amongst unsecured lenders, often who charge very large interest rates to reflect their unsecured risk, but want the added security of a charge on the ex-client's property if the account defaults and goes into legal recovery."

Tags; Housing Debt and Bills,

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