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Last Updated: Saturday, 9 June 2007, 14:26 GMT 15:26 UK
Concerns over new debt law
By Bob Howard
BBC Radio 4's Money Box

Terraced houses
The government said the change in the law is necessary
A new law could see more people with debt problems in England and Wales at risk of losing their homes, according to Citizens Advice.

In future creditors will be able to secure debts against properties, even if the debtor has kept up court repayments.

The government says the change will close a loophole which home owners use to avoid repaying debts when they sell.

It says vulnerable debtors will be protected.

Currently, creditors can get their money back when a home owner sells their property, if they obtain a Charging Order from a court.

They can only do this if the debtor has defaulted on a payment plan, known as a County Court Judgment.

But proposals outlined in the Tribunals, Courts and Enforcement Bill mean they will be able to do this even if the person in debt has not defaulted on payments.

Sue Edwards from Citizens Advice told BBC Radio 4's Money Box she is particularly concerned because although in most cases a charging order means a debt is repaid only when an owner chooses to sell the property, in some cases people can be made to.

"If the government intends to make changes, it does need to make sure that people who do want to repay but can only afford little amounts don't lose their homes," she said.

Malcolm Hurlston
It's giving creditors the power to turn debts which are effectively unsecured debts into secured debts
Malcolm Hurlston, Consumer Credit Counselling Service

Citizens Advice said its bureaux are already reporting more firms are opting to secure their debts by going to court to obtain a charging order even when someone is ready to make repayments.

It fears any move to simplify the process as currently envisaged in the new bill will encourage this trend.

Malcolm Hurlston from the Consumer Credit Counselling Service is also urging companies to use any new law with restraint:

"If this new law is used as a blunt instrument, then it could be quite dangerous, because it's giving creditors the power to turn debts which are effectively unsecured debts into secured debts."

The government says the change is necessary to stop people with big debts benefiting from the sale of a property but then failing to repay the outstanding sum owed from the proceeds.

The Ministry of Justice told Money Box vulnerable debtors will be protected by minimum thresholds below which a charging order on a property cannot be imposed or an order for its sale made.

The thresholds have yet to be set.

Jeremy Sutcliffe, the chair of the Civil Court Users Association, said creditors are frustrated by home owners who say they do not have the cash to pay their debts.

"People's assets are now in their homes. It's fair they (creditors) should have a reasonable chance to obtain payments of their debts by the use of this asset," he said.

BBC Radio 4's Money Box was broadcast on Saturday, 9 June 2007 at 1204 GMT.

The programme was repeated on Sunday, 10 June at 1502 GMT.

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