Unsecured credit card debt can lead to repossession
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The Ministry of Justice is investigating whether or not to set a minimum amount of debt before a court can order the sale of a home after a series of cases where people have lost their homes after defaulting on relatively small credit card debts or loans.
The problem is that some creditors are managing to secure a charging order against homes if the owner fails to repay what was previously an unsecured debt. The charging order can lead to a court ordering the sale of a property so the owner can pay off their debts.
This means the creditors get their money back quicker than might otherwise be the case.
This approach by an admittedly small number of lenders has meant that people who had no idea that their home was at risk, and who would have never used their home as equity, have suddenly found themselves the subject of a repossession order.
The downturn has added to the number of people facing difficulty with loans and, unfortunately, has made creditors more imaginative in their attempts to collect ‘bad debt’.
It should be emphasised that this only happens to a very small number of people, and the Ministry of Justice proposals should protect the most vulnerable.
However, not government protection is as good as the simple precaution of not saddling yourself with more debt than you can pay back.
As ever, the best advice is to minimise all debt, especially on credit cards, and ensure that irate lenders are not finding new and ever more imaginative ways to extract their money from among your assets.
