Debit Crunch - Credit Card and Loan Debts May Lead to Mortgage Foreclosures

Once upon a time an unsecured loan was exactly that - these days it appears every loan is secured against your property, if not what when you take it out but at anytime in the future, should the creditor wish to pursue an action against you through the UK Courts.

Creditors are using tougher tactics to make debtors pay back their debts - with a recent surge in applications for charging orders. A charging order is a application made to a district judge in a county court. Initially an interim charging order will be granted as soon as the creditor applies to the court for a charge. This will make your property very difficult to sell, even if you were planning to, as a potential buyer will need to negotiate the charge being removed, and would certainly not assist in a quick sale.

You will then be dragged before a district judge a few weeks later to explain why a charge should not be put on your property against for example, your credit card debts. A full charging order will be given in 99.9% of cases and the charge will be registered against your property on the land registry documents.These court orders, enable lenders to secure bad debt on credit cards and on loans against borrowers' properties. This would result in a loss of equity were the borrower to sell.

Much more worrying for the Nation as a whole is that today some lenders are now unwilling to wait, and according to a recent UK BBC Panorama program are bypassing the initial stages of the debt recovery process and now applying for an immediate 'order for sale' from the courts, forcing the property-owner to sell up straight away and pay off their debt from the capital raised against the sale of their house.

The CPS (Crown Prosecution Service) who set the CPR rules for procedure in the county and small claims courts, appear, primae facia, to be assisting Creditors in obtaining these orders, which cannot surely be in the National interest.

Be extremely careful in defaulting on your credit card payments you could lose much more than you bargained for including your home. We may have had the credit crunch which has restricted the flow and liquidity of money but we've yet to see the full force of the 'Debit Crunch' when the Credit Card and Loan companies want their money back, when your home will become at risk of repossession, even though you've always kept up with the mortgage repayments, for the smallest of debts, aided and abetted by the machinery of state through the Civil courts.

More about loan and mortgage foreclosure information at Loans UK. Paul Magus is a London City finance expert and blogs at Insurance Blog