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. Let’s take a look at some of the most common questions people have.
Is my debt cancelled if I move abroad?
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.
Can my UK based creditors chase me for debt whilst I live abroad?
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.
Can I be made bankrupt abroad?
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.
How long does the bankruptcy last?
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.
Can I wait until I am back in the UK and be made bankrupt?
Some countries do allow a grace period for bankruptcy, which could be for around three years.
Can I choose to enter into a debt solution whilst I live abroad?
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.
What happens to my credit rating?
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.
What if I move to a new country while I am going through a UK based debt solution?
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.
I am a non-UK citizen who used to live in the UK but now have moved back to my home country
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.
Can I really not get away with debt by moving abroad?
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.
What next?
The way debt works for people travelling and living cross country is a quagmire. What I have presented here should not be taken as formal and official advice. Rather, I have merely presented some possible directions things can go in, and have outlined the general framework.
If you want to find out more or have a question that is specific to your circumstances, please call me on 0330 236 9930, 0330 236 9938 or 07961 116321. The first conversation is free of charge and all conversations are in strict confidence. You can also email me on vee@navigatebr.com