Debt and your home

When it comes to financial stability, keeping your home is a top priority for most people. However, dealing with overwhelming debts can jeopardise your ability to maintain ownership.

If not managed effectively, your home may be at risk of repossession or eviction.

But don’t despair, as there are ways to protect your home from these threats.

How does debt affect my home?

A house is one of the biggest and important purchases you’ll make in your life, and for most people making sure you keep it is at the top of the priority list.

But when dealing with your debts becomes a struggle, keeping your home can become very hard. Not only that but it can become at risk of being taken from you if you’re not careful.

All is not lost though, as there are many ways you can protect your home from this risk.

Many of the debt solutions mentioned on this site actually offer you this protection – no matter whether you rent, pay a mortgage or fully own your home.

As such, we’ve created this guide to explain how debt can affect your home and what you can do to protect it.

What types of debt could have an impact on my home?

Secured debt

One of the primary concerns when it comes to debt and homeownership is mortgage arrears.

Falling behind on mortgage payments can place your home in jeopardy, as your mortgage lender has the right to initiate repossession proceedings if you fail to act promptly.

It is essential to engage with your lender and explore solutions to resolve the arrears and establish a repayment plan that suits your financial circumstances.

Unsecured debts

While unsecured debts, such as credit card debt and payday loans, may not directly target your home, they can still impact your financial stability.

Failure to address these debts can lead to adverse consequences, including damage to your credit rating, making it more challenging to secure future loans or mortgages.

Debt and renting

For individuals who are renting a home, debt can also have implications. Falling behind on rent payments puts you at risk of eviction.

Landlords have the right to obtain a possession order from the court to regain possession of the property.

If you fail to vacate within the specified period, the landlord can seek a warrant of possession, which allows bailiffs to evict you.

To prevent eviction, open communication with your landlord is crucial. Explaining your situation and negotiating a repayment plan may help you reach a resolution. Additionally, ensure you are receiving all the benefits you are entitled to, as these can provide additional financial support.

Debt and mortgages

Being in arrears with your mortgage payments is a situation that should be avoided at all costs.

Failure to keep up with mortgage repayments puts your home at serious risk of repossession.

While some mortgage companies may prioritize their own financial interests, repossession is typically considered a last resort.

To prevent this outcome, it is crucial to proactively engage with your lender.

Create a budget to assess how much you can afford to pay and explore ways to cut back on expenses.

Government support may also be available to those receiving certain benefits.

Will unpaid debt impact my credit file?

Failure to address debts can have a significant impact on your credit rating. Late or missed payments, defaults, and County Court Judgments (CCJs) can all leave a lasting mark on your credit file.

These negative entries make it more challenging to obtain future credit or secure favorable mortgage rates.

It is essential to prioritise debt repayment and maintain regular communication with creditors to avoid the long-term consequences of a damaged credit history.

What is a County Court Judgment (CCJ) and how does it impact my home?

A County Court Judgment (CCJ) is a court order that can be issued to enforce debt repayment.

If a creditor decides to pursue legal action against you, and the court issues a CCJ, it will become a matter of public record and can have severe consequences for your financial standing.

In relation to your home, a CCJ can potentially lead to a Charging Order, where the debt is secured against your property.

What happens if I receive a final charging order against my property?

If a creditor successfully obtains a Charging Order against your property, it means the debt is secured against your home.

A Charging Order creates a legal right for the creditor to recover the outstanding debt by forcing the sale of your property.

It’s important to note that obtaining a Charging Order does not automatically lead to the sale of your home.

The creditor must apply for an order for sale through the court, and you have the opportunity to defend against the recovery of Charging Order debt.

Is it possible to stop an order for sale?

It is possible to defend against an Order for Sale, but you would need to have a strong argument. Below are three possible defences against an Order for Sale.

There’s an alternative way of discharging the debts

You can argue that there are alternative methods of repaying the debts that would not require the sale of your home.

Presenting a viable repayment plan or proposing an Individual Voluntary Arrangement (IVA) or Debt Arrangement Scheme (DAS) can help demonstrate that alternative arrangements are feasible.

The creditor’s interests are already protected by the charging order

If the creditor’s interests are sufficiently protected by the Charging Order, you can argue that an order for sale is unnecessary.

This defense may be applicable if the value of the Charging Order is equal to or exceeds the equity in your home.

A sale would cause undue hardship to members of the household

If selling the property would result in significant hardship to you or other members of your household, you can present evidence to support this claim.

This defense requires demonstrating that the negative impact on your well-being outweighs the creditor’s interests.

Will most debt solutions protect my home from creditors?

The protection of your home from creditors varies depending on the debt solution you choose. While some solutions prioritise safeguarding your home, others may not provide the same level of protection.

Individual Voluntary Arrangement (IVA)

An IVA is a formal agreement between you and your creditors to repay your debts over a fixed period, usually five or six years, after which your remaining debts will be written off.

While an IVA offers protection against legal action and stops creditors from pursuing further action, it requires a commitment to regular repayments.

Failure to adhere to the agreed terms can still put your home at risk.

Debt Arrangement Scheme (DAS)

DAS is a Scottish debt management solution that allows you to repay your debts over an extended period. It offers protection from legal action and prevents creditors from taking further enforcement measures.

Maintaining regular payments to the arrangement – known as a Debt Payment Programme (DPP) – is essential to protect your home under DAS.

Debt Management Plan (DMP)

A DMP is an informal arrangement with creditors to repay your debts at an affordable rate.

However, since a DMP is not legally binding, it does not provide the same level of protection for your home.

While it simplifies the debt repayment process, serious debt-related issues may still pose a risk to your property.

Where can I get debt advice and support with my unsecured debt?

Navigating your financial problems can be a daunting task, making you feel helpless and confused about the next steps.

The good news is there are lots of debt management strategies out there that can steer you on the path to a debt-free life, and at Talk About Debt, we’re here to help you find the right one for you.

We’re not like most debt management companies—we’ve successfully led thousands of people away from the dangers of unsustainable debt and improved their financial circumstances. To find out more, get in touch with us today.