How to Settle a CCJ Before Mortgage Application
Almost everyone knows that having bad credit when applying for a mortgage is not easy to deal with, however, there are ways in which you can increase your chances of getting accepted by specialist mortgage lenders who are willing to take the risk on people making an effort to rectify any previous bad credit history such as a County Court Judgement or CCJ.
Use our online mortgage calculator as a guide for your monthly repayments now
We have access to over 200 lenders in the UK to get you the best ratesWe are expert mortgage brokers
What Is a CCJ?
CCJ refers to a county court judgement. It is a judgment issued by the court if someone or a lending company takes you to court for owing them money, but you do not respond to the court claim issued to you.
The claim is usually sent by mail and contains the following details:
- How much you owe
- How much you should pay in instalments or the total amount
- Payment deadline
- Who to pay
How Does a CCJ Affect Your Credit Rating?
A county court judgement or CCJ impacts your credit rating negatively. It lowers your credit score, affecting your ability to borrow money, interest rates, and repayment terms and applying for a mortgage with a CCJ can be difficult.
How Does a CCJ Affect Your Mortgage Application?
A CCJ is a significant credit issue. It is a red flag that indicates to mortgage lenders that you do not keep up with debt repayments. As such, it makes it difficult for you to borrow money. If you qualify, your credit limit is usually lower than borrowers with no significant credit issues. With bad credit mortgages, you are also charged a higher interest and may be required to pay a higher deposit.
Furthermore, getting a mortgage application approved from a high street lender is extremely difficult, and your best option is specialist lenders such as specialist CCJ mortgage lenders or bad credit mortgage lenders.
Even with a specialist mortgage lender, you must meet their eligibility criteria and pass their affordability test. Consult an online mortgage advisor or a specialist mortgage lender for assistance with finding a suitable lender, despite your adverse credit issue.
A specialist mortgage broker will look at your credit file and match you with a suitable mortgage provider. Since they understand the eligibility criteria for each lender, they will also help you with the application process to increase the chances of getting a mortgage approval. In addition, they offer valuable debt advice to help you improve your credit score and can help you negotiate favourable mortgage payment terms. The mortgage expert can also help you get approved for a self employed mortgage even if you have a CCJ in your credit report.
How to Settle a CCJ Before a Mortgage Application?
The best way to settle a CCJ before applying for a mortgage is to pay the lender the amount owed. If you pay the amount owed within one month, the court can remove the judgement from their register and, consequently, from your credit report. Write to the court with proof of the total payment and request to be removed from the CCJ register.
If you pay after one month, they will not remove you from the register, but the CCJ will be marked as satisfied. However, the CCJ will stay on your credit report for six years, but lenders who conduct enquiries on your credit report will see that you’ve paid it. You must write to the court with proof of payment to have your CCJ marked as satisfied.
Alternatives for Settling a CCJ Before a Mortgage Application
Negotiate a Favorable Payment Plan
Assess your income against your expenditure and determine how much you can manage to pay each month. Then make an offer to the creditor. Do not offer more than you can afford, as it will result in missed payments, leading to the creditor taking further measures to recover the owed amount.
Request a Redetermination
The option to request a redetermination only applies if the CCJ was a judgement after determination and if the court receives your application within 16 days of the judgement. The application process is free. It is done in writing, and you must enclose a copy of your budget indicating how much you can afford to pay.
A district judge would review the redetermination request if a court officer made the original CCJ. If a district judge decides the initial CCJ, you will be required to attend a local county court hearing for a determination of new mortgage payment terms. However, if a district judge decides the rate at a hearing, there is no option for a redetermination.
Variation
If it has been more than 16 days since the CCJ passed, you can apply for variation at any time if you find the instalments too high. The application process entails filling out an N245 form, and a court fee applies. You can apply for a variation at any time.
Therefore, If you have a change in circumstances that makes it challenging to keep up with agreed payment terms, do not wait to default and for the lender to take further action to recover the debt. Contact the lender to explain the issue and fill out the N245 form.
The N245 form is similar to the N9A admission form the court sends you when your lender applies for a CCJ. You are required to provide details about your income. Living expenses and debt, and make a debt payment offer. You should then send the form and the applicable court fees to the court. They will send the form to the creditor to confirm if they agree to the new instalments. The court will determine a fair amount if the creditor disagrees with your suggested instalment. It will then write to you with details of the new instalment.
Get the CCJ cancelled
There are three main circumstances under which your CCJ can be cancelled:
- If the CCJ was wrongful, e.g., if you already paid the debt at the time of the creditor applying for the CCJ.
- If you were not aware of the CCJ. For example, if the notification forms were sent to the wrong address.
- If you pay the CCJ within one month.
How Do You Know If You Have a CCJ?
Ideally, you should know you have a CCJ immediately after it is issued. The court sends the notification to your address as provided by the creditor. However, if the provided address is wrong, you may not know that you have a CCJ.
Therefore, confirming if you have one before moving on with a mortgage application is best. There are two ways you can find out if you have a CCJ. The first way is to check your credit report. CCJs are usually recorded with various credit reference bureaus. Download your credit report on each of the three credit reference agencies. Since the agencies update their records on varying schedules, the CCJ can reflect on one credit reference bureau but not the others. Checking all three is essential as you do not know which credit reference agency will run an inquiry for your credit history.
Alternatively, search the registrar for judgements, orders, and fines. You can search only or visit the country court registrar’s office. Typically, the search is conducted at a small fee.
What Happens If You Do Not Settle a CCJ?
If you do not respond to a CCJ claim or meet your repayment instalments, further measures can be taken against you by the court or lender to recover the debt owed. Creditors may further seek to recover their money in the following ways:
Warrant of Control
On the first visit, the bailiffs will contact you by phone or visit your home and allow you to pay the amount owed or agree with the lender on a repayment plan. They cannot enter your home or take anything on this first visit. They come with a controlled goods agreement (CGA) whereby they identify goods that could go towards the debt. However, they allow you time to follow through with the repayment plan with the lender. If you default on the repayments, they implement the agreement. They can legally use reasonable force to enter your property and cease the agreed items towards your debt settlement.
Attachment of Earning Order
This option works if you are employed, pay PAYE, or receive an occupational pension. Your creditor applies to the court for an attachment of an earnings order. The court then writes to you to notify you about the earning order. They also send you a statement of means document — N56 form that you should use to respond.
You should complete the form within eight calendar days and return it to the court alongside a copy of your recent wage slip. The earning order enables the court to deduct a fixed amount of money from your income to go towards the settlement of your debt. It instructs your lender to send a stipulated amount of money from your payment to the court. The court then forwards that money to the creditor.
Once you have paid your dues, apply to the court to suspend the attachment of earnings. You can also request for the attachment of the earnings order to be suspended by checking the relevant box in the N56 form and providing your reasons. If the court accepts your reasons, it will suspend the earnings order, in which case they will not notify your employer and not deduct any amount from your income.
If you do not respond with the statement of means documents, you might be summoned to court for further questioning. If you still do not respond, you may be prosecuted.
Bankruptcy Petition
If you owe more than £5,000, the creditor can petition the court to make you bankrupt. Although it seems like such an extreme action, some creditors go this route if they know you have a property you can sell to recover their money. They could also do it to punish you for failing to pay off your debt and make it difficult for you to access credit. Before the creditor can apply for a petition to make you bankrupt, they must prove that they have tried other methods to have you pay the amount owed. For instance, there should be a CCJ in place and send a statutory demand at least 21 days before petitioning the court for a bankruptcy order.
Charging Order
If you do not settle your debt, the lender can seek a charging order with the court. A charging order turns your unsecured loan into a secured loan where the creditor secures their debt against your property or shares.
Charging orders are only applicable for debts with a CCJ in place already. The creditor may seek the charging order on you if you missed a repayment instalment or do not pay the entire amount owed as stipulated in your CCJ. If a charging order is placed on your house, getting an equity release or remortgage is difficult. If you sell the house, you have to pay off the debt owed to close the sale.
Can I Be Jailed If I Do Not Settle a CCJ?
If you do not honour the court order to pay the amount owed, the court will issue you a hearing order to discuss your income and a repayment plan. If you do not show up for the hearing, you will be found to be in civil contempt, and the court may issue you with a prison sentence as a last resort.
If you have a County Court Judgement and want to settle it or are considering a mortgage application with a CCJ contact us now.