If you are a home owner in the UK and you are planning to start an Individual Voluntary Arrangement (IVA) your property will have to be considered in the arrangement. If there is equity you will need to agree to try and release your share of this for the benefit of your creditors.

However if you own a property outside of the UK perhaps in the form of a holiday home what happens then? It is still one of your assets and as such it should also be disclosed in your Arrangement.

However the fact that the property is not located in the UK means that the way it is dealt with will be different. We explain what the implications are for this asset and any income you generate from it.

Will income I earn from my property abroad have to go into my IVA?

If you rent out a property that you own abroad and generate an income from this then this money must be included in your overall income calculation in your IVA.

This does not automatically mean that all of the income you generate in from the property will have to be included in the arrangement. Just as if you owned an investment property in the UK you can include all of the costs involved such as mortgage payments, management fees and maintenance costs in your living expenses budget.

Nevertheless if the income you receive from the property has a positive effect on your overall income then this would mean that it will increase the amount you are required to pay into your Arrangement.

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Will I have to release any equity in a property I own abroad?

If you start an IVA the way that equity in a property you own abroad is dealt with is different to property you own in the UK. This is largely because it is generally more difficult to release equity in property outside of the UK and your Insolvency Practitioner (IP) does not have the same legal authority it.

If there is no equity then the fact that you own it will still be recorded. However it is likely that a nominal payment of as little as a few hundred pounds will be accepted to ensure that there is no further consideration of the property and it is subsequently excluded from the Arrangement.

If your property does have a significant amount of equity in it then this should be taken into consideration as part of your assets when agreeing the amount your creditors will receive. However it will be recognised that your ability to release any of this equity will not necessarily be easy.

The possibility of remortgaging the property locally may not exist or other joint owners might resist any equity release. If this is the case the cost of trying to force equity release would probably outweigh the benefit of actually doing so. It is therefore likely that you will be able to offer a lump sum which is far lower than the value of the equity in return for the property to be excluded from further consideration within Arrangement.

Can I simply keep quiet about a property I own abroad if I start an IVA?

If you own a property in the UK this will be easily discovered because a search will be carried out against your name at the land registry. Any property you own will be shown in the results of this search. However this is not the case for a property that you own abroad.

If you do not tell your IVA company about this property there is really no way for them to check up about whether you are telling the truth. As such unless there is any other evidence pointing to the fact that you own the property it is unlikely that they will find out about it. This means that you could chose to keep quiet and not disclose it at all.

Having said that if there is evidence that you own the property it will normally be discovered and so it is best that you are up front and disclose it. This evidence could include regular payments showing on statements from your UK bank account to an account abroad suggesting you are paying a mortgage. Alternatively receipts showing on your statement suggesting that you are receiving rental income.

Of course if any income you generate from the property stays in the country where it is located and does not show up on any of your UK bank statements then you could chose not to disclose it at all as it is unlikely your IVA company will ever discover it.

BMD  Tip: If you own a property abroad then you should always disclose this before you start your IVA. If you do not and it is discovered at a later date such non disclosure could result in the failure of your Arrangement.