Published in Debt Advice Features on Wednesday, July 04 2007

Before you go ahead with any debt solution you should seek further advice regarding property you own abroad, and I would not advise trying to hide the details of the property as this could be classed as fraudulent behaviour. Here are the different ways it could possibly be affected.

In bankruptcy, if there is any equity in the property you may have to surrender the property into the bankruptcy as the equity will go some way to paying your creditors off. However if there was no equity or you were not in a position where you could actually release it – which can often be the case the property abroad, as long as you’re honest about you may be able to keep it. Another factor that will be looked into is how much the property costs you on a monthly basis for example. If paying for the property meant you were insolvent, and that if you weren’t paying then you could afford the debts, then the judge administering your bankruptcy could turn round and say well sell the property and you won’t need to go bankrupt… If you were paying a large amount towards the property regardless of whether you could afford your debts if you had it or not, it is going to be frowned upon, however if it is hardly costing you any thing, and is deemed as reasonable along side hardly having any releasable equity in it then you may be able to keep the property.

In an Individual Voluntary Arrangement the rules regarding property abroad is pretty much the same as the rules regarding any property you have in the United Kingdom. If there is any releasable equity you will be asked to release it in the fourth year of the Individual Voluntary Arrangement by means of a remortgage. If you jointly own the property abroad, and the other person is not entering the IVA then you will only be expected to release your share of the equity, perhaps 50%. If there is no equity or again none that is releasable, then as long as your honest about the property you may be able to keep it. Again like bankruptcy it will be looked at how much you are paying out for the property, and this would need to be seen as reasonable also for you to keep the property.

If you look at something like debt management you are not likely to be asked about it, as you don’t need to release equity from your assets in this type of solution. With the property being abroad it is also under different laws and legislation and so the creditors wouldn’t easily be able to access any equity in the property. If you are asked about it my advice is to be honest as always, but like I said you are unlikely to even be asked about it.