Property Abroad and Bankruptcy

James Falla

• 29 Nov 2021

If you go bankrupt any property abroad you own is included. If you want to keep it you will need to make a reasonable offer to by back your interest in it.

Included in this article:

• Is your property abroad included in bankruptcy?
• What if there is significant equity in it?
• What happens if you generate income from it?
• Could you just keep quiet?

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Is your Property Abroad included if you go Bankrupt?

Any property abroad that you own is treated as part of your assets if you go bankrupt in the UK. You must declare it in your application and the Official Receiver (OR) will be interested in it.

As with a property in the UK your beneficial interest in the property passes to the OR. They therefore have the right to demand that your share of any equity is released and paid to them.

Having said that they are aware that taking legal action locally to force you to do this could be costly. As such they will normally be willing to accept a sensible offer to buy back your interest based on the value of your equity less the potential costs of forcing you to release it.

If you have property abroad which you own outright it is likely you will have to sell it and hand the proceeds to the UK Official Receiver.

What if there is substantial equity in any Property Abroad?

If you have a considerable amount of equity in the property you own abroad the OR is likely to ask you to sell it. If you do not want to do this they will be willing to accept a cash lump sum as an alternative.

The lump sum offered could be less than the ‘on paper’ value of the property. It is perfectly acceptable to use a forced sale valuation and deduct the potential costs associated with the sale from any offer made.

However if you cannot or will not make such a payment the OR will normally be inclined to take the appropriate legal action to force you to sell. They can wait as long as they like to do this. It does not have to happen within 3 years.

Because it is not your main residence your property abroad is treated as an investment asset. As such the OR retains their interest for as long as it takes for the equity to be released.

What happens if you generate income from your Property Abroad?

If you generate any income from your property abroad you should declare this on your application form as part of your overall income figure. This will then be taken into consideration when the OR is deciding if you can afford to pay towards your debts.

In the same way as declaring the property itself you will have to decide whether or not you declare the income you get from it. If there is no record in the UK of you generating income then it is unlikely that the OR will discover it. The most common form of record is if you receive regular payments into your UK bank account. The OR will then see statements showing this.

Could you just keep quiet about any Property Abroad if you go Bankrupt?

You will be asked on your Bankruptcy application form if you own any property abroad. However there is no official UK based record of this. As such it is very difficult for the Official Receiver to check if what you have said is correct.

The OR will ask for your last 12 months bank statements. If there are regular transfers to an overseas mortgage account these are likely to be discovered. The OR will then question you further and the fact you own a property may come to light.

If you are not honest about a property you own abroad and the OR finds out later this will be regarded as non co-operation. Your Bankruptcy will then probably be extended. The OR will also take appropriate action to realise any value you have in the property.