If you leave the United Kingdom without having paid your debt, different rules and regulations will apply pertaining to that debt, depending on where you move. Here are answers to some common and general questions.
No, the debt is not cancelled. Any record of unpaid / remaining debt remains on your financial record, known as your credit file. This means anytime you try and borrow money, take a loan or mortgage or any kind of credit, the lender (no matter which country they are from) can access your credit file and decide whether to lend to you or not. If you do leave the UK without paying off debt, you will struggle to get credit in the country you are living in, just as you would in the UK, therefore it is worth taking out a debt solution to get it cleared.
Yes, they can chase the debt via a variety of methods such as:
- Using a debt collection agency
- Taking court action
The laws followed in these procedures will be based on the country you are currently residing in and any other types debt retrieval laws and methods the country has in place. It is important to note that if you do have any wealth or assets remaining in the UK, those can be seized and used to pay off your debt according UK laws.
You can be made bankrupt abroad according to the laws of the country you live in. Bankruptcy is sort of an internationally recognised standard. This means the courts in most European countries and some non-European countries will work with each other to deal with any bankruptcy proceedings against you, using a common set of standards.
A typical bankruptcy in the UK will last up to a year, but if you are made bankrupt abroad, the bankruptcy will last according to the customs of that country. In some countries, bankruptcy orders can last up to seven years – which is not ideal! This has given rise to bankruptcy tourism where someone will move to a country where the bankruptcy period is short to then become bankrupt.
Some countries do allow a grace period for bankruptcy, which could be for around three years.
Yes you can, under certain conditions.
First let’s understand the main types of debt solution procedures available for individuals in the UK.
- Individual voluntary arrangements (IVA): This is a legally binding agreement between you and your creditors ratified by the Court that you will pay back a debt in set instalments over a period of time
- Bankruptcy: You can also make yourself bankrupt. This is essentially a declaration that you don’t have the money to pay off your debt, it is then written off after a year (based on UK law).
- Debt management plan: Very similar to an IVA except that it is not as legal and formal and is used to deal with so called less serious debt like outstanding credit card payments.
The laws can be complex to follow, but let’s cover some of the most frequently occurring scenarios. The following information is correct as of February 2021, but it remains to be seen how Brexit changes the landscape.
I have emigrated out of England
If you have emigrated out of England under three years ago, you may be able to use one of the aforementioned individual UK-based debt solutions. If it’s been over three years since you moved, you may have to follow the laws of the country you are residing in to settle your debt.
I am living in the European Union
Except for Denmark, you cannot use UK based debt solutions whilst residing in another country in the European Union regardless of how long you have stayed there. There may be exceptions, for example, if you return back to the UK periodically or within a given time frame.
One thing to note is that debt solutions of the country you live in will cover your UK debt according to their laws.
The one exemption to this law applies to British expatriates, that is people living in another EU country whilst retaining their UK citizenship. In this case, you can still take out a debt management plan according to UK laws, but not any other solution.
I am living in a country not in the European Union or Denmark
In this case you can still use UK based debt solutions but certain time limits do apply. However, there is no time limit on using a debt management plan.
There is actually some good news here. Luckily, the concept of a credit rating, in terms of how it works in the UK, is not recognised internationally. This means if you are able to use a UK based debt solution, whilst living abroad, your credit rating in entirely unaffected. Your credit rating would only be affected if your or your creditor used a debt solution of the country you’ve emigrated to.
Unless the Court makes it legally binding on you to stay in the UK, you can move to a new country whilst going through a debt recovery process.
If you have UK-based debt but now have moved back to your home country for whatever reason, you may be able to use a UK debt solution to sort it all out. It depends on your circumstances, the main one being how long it’s been since you moved.
Truth be told, if you owe an amount of debt that your creditor doesn’t think is worth chasing you across borders for, you will ‘get away’ with it. But if you move back within the UK in six years, they could continue pursuit of monies owed.
If your creditors remain inactive for six years with respect to reclaiming what you owe them, you could become statute barred, which means creditors can no longer use legal means to recover debt from you.
Yes, this is possible. If you cannot keep up with DMP payments or acquire further debts, previously unknown, you can file for bankruptcy.
Depending on the amount of debt you have, you can apply for bankruptcy, take out an Individual Voluntary Arrangement (IVA) or debt management plan (DMP).
If you fall back on mortgage repayments from your property abroad, your home could get repossessed. What can be done is entirely dependent on your circumstances. If you have other assets or savings that can be used to pay the mortgage, that would be ideal. However, if you don’t have funds to fall back on, you could file for bankruptcy and have the home repossessed.
It’s possible that they will chase you, wherever you are. They may even approach your family and friends to ascertain your whereabouts.
It means the mortgage repayments remaining on the property is higher than the value of the property. For example, if there is a mortgage of £200,000 on a property, but due to market conditions the value of the property has fallen to £150,000, there is now a negative equity of £50,000. So in theory, if you were to sell the property, it would not pay off the entire debt on the property.
If you can afford to continue making mortgage repayments, you should do so as prices can always rise and put the property back into positive equity. However, if this is not possible, bankruptcy is often the solution.
No you don’t have to. In fact, when trying to apply for credit in another country, it is highly unlikely they will ask you about any debt and bankruptcy history outside the country you’re in.
No, you will usually start on a clean slate of credit.
ICO reg: ZA292643 | 
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