Should Homeowners Have A Minimum Level Of Debt Before Repossession?
A large number of home owners in the UK have high levels of debt through personal loans and credit cards and although a secured loan may be cheaper than an unsecured loan, many individuals choose to take out an unsecured loan in the belief that they will protect their home in the event of a default on the loan.
However, this is not the case, as many people are beginning to find out. Even if someone has an unsecured loan, it is possible for the lender to place a “charging order” on their property in the case of arrears or default, which could eventually lead to repossession of their home.
As a result of an increase in charging orders in recent months, the Ministry of Justice has released a consultation paper on whether a borrower should have a minimum level of unsecured loan debt before a charging order is able to be applied, thereby providing extra protection for the home owner.
Bridgett Prentice, the Justice Minister said “We know that only a small proportion of charging orders result in the property being sold, so it’s rare for a debtor to lose their home because of things such as unpaid credit cards. There are currently a number of safeguards in place to protect home owners, while ensuring the creditors who need to recoup their money are able to do so.”
“But it is important that the Government consider whether there is a risk that the numbers will increase due to the current economic situation and whether this could result in more people losing their homes because of relatively low levels of debt which they are unable to pay. We’re asking for views on whether a minimum threshold should be introduced in law, to prevent this from occurring.”
