There are well established rules about what happens to any property you own in the UK if you go Bankrupt. However the way that a property you own in another country is treated is not so clear.

Whether property you own abroad is at risk will depend not only on how much equity there is in it but also on several other factors including whether or not the Official Receiver (OR) in the UK actually finds out about the property and how easy it might be for them to force the release of any equity.

We will explain the impact of these different factors to give you a better understand of how property you own abroad is likely to be affected by Bankruptcy in this country.

Will I have to sell property I own abroad if I go Bankrupt?

If you own a property outside the UK with little or no equity in it due to it being jointly owned or its value being less than the remaining mortgage then it is very unlikely that the OR will be very interested in it and there will be very little risk of you having to sell it.

Where this is the case the OR will often waive any interest they have in the property in return for a token payment which could be as little as a few hundred pounds.

However there is more  of a problem if there is a large amount of equity in the property. The OR is certainly interested in this equity and will need to release this in the same way as if the property was located in the UK.

Having said that it will be difficult for the OR to force you to re-mortgage or even sell the property because they do not have the same legal power over it as they would do if it was located in the UK. Nevertheless simply refusing to release equity in the property you own is not a good idea.

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What are the options if there is a lot of equity in a property I own abroad?

If you refuse to help the OR realise the equity you have in your property abroad then they would normally consider taking legal action in the local country to force its sale and extend the length of your bankruptcy in the UK for non cooperation. However understanding more about this situation can work in your favour.

The issue the OR faces is that it is likely to be difficult and costly to force the sale of the property particularly if it is located outside the EU. The OR would have to be very mindful of whether or not the potential cost of such action would out way any possible benefit to your creditors and so render it impractical.

Because of this the OR is likely to be willing to consider other reasonable alternatives for dealing with the equity. For example they are likely to accept a cash lump sum which is possibly far less than the value of the equity in exchange for taking no further interest in the property. This is simply because when weighed up against the costs of trying to force a sale it provides a better return for your creditors.

What happens if I do not disclose property abroad when I declare Bankruptcy?

When you submit your Bankruptcy application in the UK you will be asked a specific question on your application form about whether you own any property abroad. You are legally bound to answer this honestly. However if you do not mention your property abroad the question is how likely is it that the OR will discover it.

The OR cannot simply find out if you own property outside the UK from an international register as non exists. However they are likely to ask you to provide them with your last 12 months bank statements. If these show any transactions regarding your property then it is likely that they will ask more questions.

Having said that if there is no paper trail of transactions such as regular transfers to pay a mortgage then the OR is unlikely to discover it unless someone else decides to inform them and as such you might simply decide to keep quiet about it.

BMD Tip: If you decide not to inform the OR about your property abroad then you need to be aware that if they do find out in the future you would likely receive a BRU (bankruptcy restrictions undertaking) which would extend your bankruptcy for a number of years. Also the OR will then attempt to release this and may not be so willing to take a reasonable offer in place of it as you did not declare the property in the first place.