Looking to go bankrupt in the UK, living in Australia - any advice?

[thekennys]

Looking for some non-judgemental advice from you clever folks...

 

Myself and my wife bought a flat in London in November 2007 on virtually a 100% mortgage (I know, I know.. insane, but back then everyone was at it, and it took us two years alone to save enough for the stamp duty and fees!). After the market went pop, within 6 months, it was worth about 60K GPB less than we paid for it. Coupled with being unlucky (or stupid) enough to buy at the peak, we bought terribly, an old flat in a questionable area that needed a lot more work than we could have imagined. We have tried to sell twice, and not one offer, even below asking price. Since departing the UK, we are renting the property out behind the back of the mortgage company as they refused our request to let it out when my industry all but disappeared (construction) I had no choice but to up sticks and move abroad chasing work. We're making a fair go of it living here and getting to love the place and being back working in a busy industry, and have three kids now. The constant sending of cash we cannot afford back to subsidise repairs and mortgage payments is becoming a pressing issue to say the least - probably about 8 grand GBP this year alone... We are only paying interest on the repayments and barely afford this, thus haven't paid a penny off the mortgage yet, five years on... I have a small credit card debt in the UK, about 3K, from paying for a new boiler last month, but nothing else debt wise - just this bloody mortgage. We've just been told the entire property needs new windows and a new kitchen (!!), so another 20K debt is flashing before my eyes...

 

SO - I have been looking at bankruptcy. I don't have residency yet here in Oz but will start process next Feb when I have been here two years and it should be quite straight forward as I have a good secure job earning a good wage. I don't foresee going back to London as it's such a mess there and things going well here, so looking long term to citizenship for myself and my happy brood. I'd love to hand back the keys and have spoken to a few insolvency agents who seem a bit too enthusiastic, and make it all sound too easy - if you l know what I mean! used car salesman springs to mind...

 

I understand you need to pay a few grand to get the process managed for you but my main worry is being left with a 60-70K debt I have to pay off from the flats negative equity, which would pretty much ruin us financially for ever. Anyone been in the same situation and can offer advice, I'd be very grateful. Anything will help, we're getting a bit low here worrying about this.

 

Thanks guys!

[aussie02]

Be careful how you go about this, especially before you get your \perm res- if you ever intend getting a mortgage in Oz - check out forms - will you need to produce a credit report from UK to get one? - maybe ask a broker over there. I'm m not familiar with the UK - but the whole idea of bankruptcy is that you could walk away with out that 60 k burden and start again after a couple of years. I have a funny feeling you may have to be resident in the UK though. Find out if you can do it with Oz solicitor or Court. Its not the same as throwing back the keys - then you would be left with the burden - there is a money advice service in the UK that's free - maybe you could email them. they are not looking for your money - just to help. good luck

[Guest littlesarah]

I"m afraid I have no knowledge or experience of bankruptcy, but I'm sure someone will be along who knows about these things. It sounds like you need some good, sound advice, so hopefully if nothing else you'll have someone suggest an appropriate person. If you have negative equity bankruptcy is probably the only way to get rid of it (apart from pay off the balance, which you would have done already if you were in the position to). I know that can have some ramifications in terms of credit rating in the UK, but it's better to have a rubbish credit rating and be able to sleep at night than try to service an unmanageable debt.

 

If anyone does post on this thread to judge your situation, please just ignore them. I've lived in a very cash-stressed household, and no one understands how incredibly stressful it is unless they've lived it. (The fear of the door knock is something that I'll never forget, even 20 years on.)

 

Hope you get things sorted so that you can get on with your life - every adversity teaches us something, in my experience.

[Guest littlesarah]

I found this link, which contains some basic info about the process: http://www.adviceguide.org.uk/england/debt_e/debt_help_with_debt_e/debt_dealing_with_urgent_debts_e/bankruptcy.htm

 

And this, about bankruptcy from outside the EU: http://bankruptcy.org.uk/archives/item/6131-can-i-go-bankrupt-in-the-uk-from-australia

 

It looks as though the consequences of UK bankruptcy may also affect things in Australia, but if you are unable to meet your debt obligations you may decide to wipe the slate clean and start over. If I were in your situation I'd be wanting to get advice from an accountant or lawyer who specialises in bankruptcy.

[thekennys]

Thanks for the tips and link so far guys, all avenues being explored. As you mentioned, littlesarah, I'd love to be able to pay off this debt, but as an asset it's losing money, especially being a rented property as the tenants we have have all been pretty rubbish at looking after it, and managing agents don't give a damn. I can only see gloom ahead, as there aren't many first time buyers around in London we can offload too, and we won't be able to command much more rent due to the area not being a popular one, and the current tenants not caring for it. I was reading last week alone that first time buyers need an average of 56K GBP deposit to get a mortgage on the average London property - which is insane. No wonder the property market is stagnant. We just want a fresh start so we can save for a possible mortgage here one day, the kids education etc. without having a massive debt hanging over us that I worry will eat away at anything we can build here.

[amibovered]

Have a chat with these people http://www.bankruptcyfromabroad.co.uk/

[blossom]

I was talking to someone a while ago who was going to declare themselves bankrupt in nz. From what I remember he was saying that you also have to declare it in oz too, and that it stays on your file for something like 6 years. So in that time you can't get mortgages etc, and are not allowed to own a bussiness.

 

Good luck, but I think it may end up being harder than it sounds Australia end wise.

[PositivePixie]

UK bankruptcy doesn't have a single impact on your credit rating etc here in oz. It will have serious implications in the UK, meaning 3-6 years of NO credit at all (further than just no overdraft or credit card) it can affect insurance premiums and other things as well. And you will struggle to ever get a mortgage there again. However, its not the end of the world and you do bounce back from it - this is of course if you ever return to the UK anyway.

 

I have many years experience of bankruptcy in the UK, and the implications upon emigrating too, this us not just something 'I reckon' or pondering on btw.

 

 

Please contact a not for profit charity that can assist you, go to martin lewis' website moneysavingexpert for details, you do not have to pay for this advic. The UK gov website has details about declaring yourself bankrupt, so will be getting the technicalities of how straight from the horses mouth.

 

If you just stopped paying it, they may do it on your behalf (they can't go for a ccj if you haven't lived there the past x months) but moneysavingexpert will be able to give you more info on the ins and outs. Good luck with everything.

[Guest guest68546]

Have a word with an Oz tax advisor.... you might be able to claim tax deductions in Australia on your UK rental property. It may alleviate short-term hardship.

Edited December 17, 2012 by guest68546

[Guest GeorgeD]

Have a word with an Oz tax advisor.... you might be able to claim tax deductions in Australia on your UK rental property. It may alleviate short-term hardship.

 

You can claim mortgage interest and certain maintenance costs against your Oz tax return. I think you can even claim them if they are more than your income from the rental. Assuming of course you declared the rental income in Oz...speak to an Accountant, buying to rent is very popular in Oz not so much due to the rental income, but because you can offset so much agaisnt tax...even for international properties.

[russ and claire]

No experience in this area but what about the property going to auction. Hope it all works out for you, money stresses are dreadful.

[Quinkla]

You are bankrupt so therefore you shouldn't feel any guilt about declaring bankruptcy. It is a world of difference from someone who runs up debts with the intention of declaring bankruptcy - that would be fraud but it does not apply in cases such as yours where the debt was taken in good faith. Since you have no assets in the UK there is no point in paying a bankruptcy service - and especially don't pay for one on a credit card as that would be a debt you would be taking on with the intention of defaulting.

 

When you apply for a mortgage or other credit in Australia, your UK debt will not be mentioned.

[hmsmark]

It will have no issue in Australia. There won't be a UK credit file pulled. Completely separate. You should probably look at doing this now, since you're likely to be in Oz for awhile and the sooner you get it going, the sooner it goes away in the UK.

[craigyboy]

Hi please don't pay another penny to that UK disaster. Start your new life in Oz as UK debt at your level is not going to come back and bite you in the bum. I have great experience helping people in your situation and believe me you are an angel. Make sure you return the tenants deposit at the end of the lease.Let them bankrupt you do not make their job any easier. Pleas get on with your life and PM for more direct advice. OH and watch for the self righteous moral brigade or more commonly known as trolls putting their bit in. The perfect people that nothing has ever happened to!!!!

[Jake max]

Hi please don't pay another penny to that UK disaster. Start your new life in Oz as UK debt at your level is not going to come back and bite you in the bum. I have great experience helping people in your situation and believe me you are an angel. Make sure you return the tenants deposit at the end of the lease.Let them bankrupt you do not make their job any easier. Pleas get on with your life and PM for more direct advice. OH and watch for the self righteous moral brigade or more commonly known as trolls putting their bit in. The perfect people that nothing has ever happened to!!!!

Hi just wondered I have a parking ticket for my mobility scooter outstanding do I pay it or try and ship the beast over to oz without paying it mighty guru?

[Dublin4]

Go to Brisbane, you will be in good company! As far as I could see, being bankrupt was the second most popular reason for going to oz.

[Graemsay]

Whereabouts is the flat?

 

The market in London is generally up from 2007. It might be worth getting the place revalued and see what it's worth. Trying to sell it with sitting tenants will limit your market to investors, but if it's on a shorthold tenancy then that might not be a problem.

 

I'd suggest talking to your bank and a couple of estate agents first to see if a solution can be found. The banks are keen to avoid foreclosure at the moment due to their somewhat perilous balance sheets, so there might be something they can do to help. If you are going to declare bankruptcy then let your tenants know in advance, otherwise they might be turfed out of their home with minimal notice.

[Guest GeorgeD]

Folks, I've tidied up this thread to remove some of the off topic or offensive posts. Please stick to the topic of the original poster if you would be so kind...

[peggy]

You have been brave putting this on here and you should not be judged by others, a few people have advised from what i can see to the best and uk debt does not follow you to this land.( unless gov debt) So enjoy and try not to worry about the past and move on.

[Guest GeorgeD]

The constant sending of cash we cannot afford back to subsidise repairs and mortgage payments is becoming a pressing issue to say the least - probably about 8 grand GBP this year alone... We are only paying interest on the repayments and barely afford this, thus haven't paid a penny off the mortgage yet, five years on... I have a small credit card debt in the UK, about 3K, from paying for a new boiler last month, but nothing else debt wise - just this bloody mortgage. We've just been told the entire property needs new windows and a new kitchen (!!), so another 20K debt is flashing before my eyes...

 

Don't run away from this just yet...you could be missing out on something really positive...go see an AUSTRALIAN accountant.

 

You are paying interest only on your mortgage. Excellent...you can claim ALL of this back from your Oz tax return. The Australian Tax man will give you a big fat cheque at the end of the tax year.

 

You have bills for maintenance...excellent, you can claim them back too...if the boiler in the house you live in fails and needs replaced, then you need to pay for it. If the boiler in the house you own but rent out to someone else fails and needs replaced, then you can claim that expense back against your Australian tax...and the tax man gives you an even fatter cheque.

 

People in Australia rarely buy properties to rent out because the income is higher than the outgoings...they do it because they can offset sooooo much of the outgoings against tax that it becomes a viable option.

 

Go see an accountant. If all of your outgoings are related to maintaining a rental property you can claim most if not all of this back from the tax man in Australia. Go see an accountant.

 

Go see an accountant. you could actually end up with a positive cash flow from the Uk and still own an asset which in the future could increase in value eventually giving you a capital gain. Go see an accountant.

 

Even if your outgoings for the property are more than the income from it, you can claim the difference back from the Australian tax man, meaning you actually have more money in your pocket than you do now.

 

The tax situation may mean you are actually better off to keep the property. Whilst going bankrupt in the UK won't in any way harm your financial standing or record in Australia, it would be a shame to actually lose the income and tax benefits and find yourself worse off in Australia!

 

I think you should go see an Australian accountant. I may have already mentioned this...Once you've done this, then you are in a better place to consider what you do next.

 

EDIT: Some info on rental property deductions from Tax in Oz http://www.ato.gov.au/content/downloads/ind00313554n17290612.pdf

Edited December 20, 2012 by GeorgeD
Added ATO link

[NickyNook]

What GeorgeD says sounds great - but beware - quite often the deal is not quite as good as it sounds.

 

Some costs associated with rentals are classed as capital expenditure and thus only depreciation can be deducted.

 

For example - the cost of a repair to a boiler can be claimed immediately but the cost of a new boiler has to be spread over the life of the boiler so it could be 10-15 years before it can be fully claimed. Same with windows or kitchens as they're capital costs.

 

As he suggests, see an Australian accountant.

Edited December 20, 2012 by NickyNook

[Mike P]

Hi to the Kennys!

 

I saw your thread via our website statistics, and to give you some background I own and manage a UK bankruptcy company that specialises in overseas bankruptcy. I am not too "up" on forums and rules, but I don't think that I can mention the actual company name. Anyway, we have been mentioned already (thank you!) within the thread.

 

I have specialised in bankruptcy and Insolvency for the last seven years and have two companies; one that deals with people in the UK and one that deals with people that have moved from England or Wales (if your last address was Scotland or Ireland there are different Insolvency Rules). We are the only Company that specialises in overseas bankruptcy and we have helped people all over the World. The most popular Countries that we deal with are OZ and NZ so we have lots of specific experience with your particular situation.

 

In general, a UK Bankruptcy will not impact upon your credit in Australia. You basically start your new credit record from scratch when you move abroad (this is the same for most Countries).

 

Apart from preparing the bankruptcy we also supply a 12 month support service to our clients, and for this reason we have a very detailed knowledge of how these processes work, how they are dealt with and we always monitor if there is any impact upon people that use this bankruptcy process.

 

Your situation is very, very common to us. I would say that maybe half of our clients have the same problem. In fact, if the housing market in the UK was buoyant we would not be dealing with so many people, as there would be equity in property and people would use this to pay their debts off. In your case if property values were good you would just sell, pay off the mortgage and that would be it, but like so many others you are a bit "trapped" in your current situation.

 

So what are the options?

 

In many such cases we hand the property back to the lender, anticipate the shortfall amount when the lender sells the mortgage, incorporate this into a bankruptcy and present it on your behalf. You are then bankrupt for 12 months in the UK. This is quite a neat way of dealing with your situation as it resolves the situation and allows people to finalise their UK problems. If you want peace of mind that your UK affairs are finished this may be the way to go.

Note; your bankruptcy is shown for 6 years on your UK credit file from the start date of the bankruptcy itself. Also if you have a joint mortgage you will both be looking at bankruptcy and there is a £700 Court fee per person.

 

There are other options such as just leaving everything and hoping that the lender does not catch up with you in Australia, or maybe just handing the property back, waiting for the shortfall and then deciding what to do. Much depends on you as a person; many people I have spoken to want to resolve the issues and others are happy to ignore things.

Bear in mind that you have 3 years from moving abroad to file bankruptcy using power of attorney. If you exceed this 3 year period you would need to appear in person, in the Royal Courts of Justice (aka the High Court of London).

 

Finally you mentioned that a few “insolvency salesmen” have made this process sound too easy (I don’t think you have spoken to us yet....)! It is true that the bankruptcy itself is much easier if you are filing from abroad. You only supply the information, sign the paperwork and wait for it all to happen. It is very "remote" compared to filing a bankruptcy in person.

 

One thing you need to realise is that the Official Receiver will look at any assets you own in OZ (such as cars, property, savings, websites, tools etc) and also your disposable income will be reviewed to see if you can enter into a three year Income Payment Agreement (IPA). In the last two years we have seen a much more focused approach from the Insolvency Service and they will apply an IPA wherever possible, whether you are in the UK or abroad.

 

For this reason you may end up paying money back for three years-it all depends on your income and expenditure.

Finally don’t let the property just go into repossession. This can add around £10k to the shortfall amount due to all of the additional costs that are involved.

 

I hope that this helped.......!

[Joys of Oz]

Hi to the Kennys!

 

I saw your thread via our website statistics, and to give you some background I own and manage a UK bankruptcy company that specialises in overseas bankruptcy. I am not too "up" on forums and rules, but I don't think that I can mention the actual company name. Anyway, we have been mentioned already (thank you!) within the thread.

 

I have specialised in bankruptcy and Insolvency for the last seven years and have two companies; one that deals with people in the UK and one that deals with people that have moved from England or Wales (if your last address was Scotland or Ireland there are different Insolvency Rules). We are the only Company that specialises in overseas bankruptcy and we have helped people all over the World. The most popular Countries that we deal with are OZ and NZ so we have lots of specific experience with your particular situation.

 

In general, a UK Bankruptcy will not impact upon your credit in Australia. You basically start your new credit record from scratch when you move abroad (this is the same for most Countries).

 

Apart from preparing the bankruptcy we also supply a 12 month support service to our clients, and for this reason we have a very detailed knowledge of how these processes work, how they are dealt with and we always monitor if there is any impact upon people that use this bankruptcy process.

 

Your situation is very, very common to us. I would say that maybe half of our clients have the same problem. In fact, if the housing market in the UK was buoyant we would not be dealing with so many people, as there would be equity in property and people would use this to pay their debts off. In your case if property values were good you would just sell, pay off the mortgage and that would be it, but like so many others you are a bit "trapped" in your current situation.

 

So what are the options?

 

In many such cases we hand the property back to the lender, anticipate the shortfall amount when the lender sells the mortgage, incorporate this into a bankruptcy and present it on your behalf. You are then bankrupt for 12 months in the UK. This is quite a neat way of dealing with your situation as it resolves the situation and allows people to finalise their UK problems. If you want peace of mind that your UK affairs are finished this may be the way to go.

Note; your bankruptcy is shown for 6 years on your UK credit file from the start date of the bankruptcy itself. Also if you have a joint mortgage you will both be looking at bankruptcy and there is a £700 Court fee per person.

 

There are other options such as just leaving everything and hoping that the lender does not catch up with you in Australia, or maybe just handing the property back, waiting for the shortfall and then deciding what to do. Much depends on you as a person; many people I have spoken to want to resolve the issues and others are happy to ignore things.

Bear in mind that you have 3 years from moving abroad to file bankruptcy using power of attorney. If you exceed this 3 year period you would need to appear in person, in the Royal Courts of Justice (aka the High Court of London).

 

Finally you mentioned that a few “insolvency salesmen” have made this process sound too easy (I don’t think you have spoken to us yet....)! It is true that the bankruptcy itself is much easier if you are filing from abroad. You only supply the information, sign the paperwork and wait for it all to happen. It is very "remote" compared to filing a bankruptcy in person.

 

One thing you need to realise is that the Official Receiver will look at any assets you own in OZ (such as cars, property, savings, websites, tools etc) and also your disposable income will be reviewed to see if you can enter into a three year Income Payment Agreement (IPA). In the last two years we have seen a much more focused approach from the Insolvency Service and they will apply an IPA wherever possible, whether you are in the UK or abroad.

 

For this reason you may end up paying money back for three years-it all depends on your income and expenditure.

Finally don’t let the property just go into repossession. This can add around £10k to the shortfall amount due to all of the additional costs that are involved.

 

I hope that this helped.......!

 

 

finally......some practical advise for a horrific problem!......thanks mike xxx

[Red Hot Chili Pipers]

Don't run away from this just yet...you could be missing out on something really positive...go see an AUSTRALIAN accountant.

 

You are paying interest only on your mortgage. Excellent...you can claim ALL of this back from your Oz tax return. The Australian Tax man will give you a big fat cheque at the end of the tax year.

 

....

 

 

 

 

If tax deductions seem too good to be true they probably are.

 

The rental property will have tax implications in the UK and Australia.

 

In the UK you will be treated as a non-resident landlord and "should" have 20% of your income withheld either by the property agent or tenant. This is the main tax rate in the UK and therefore you would need to complete a UK tax return to get relief from this (for deductions such as mortgage interest / repairs / like for like replacements but not improvements / new capital items).

 

If you become resident in Oz and do not intend to return to the UK then Australian should have taxing rights over your worldwide income under the UK-Oz tax treaty. You would then tax the rental income in Oz less any deductions less any UK tax paid.

 

If your rental income does not cover your deductible expenses and you do all the paperwork (tax returns) then you will pay no tax in the UK and in Oz can probably deduct the 'excess' deductions only against other Oz income. Unless there is a major mismatch with your income and expenses re the property this then this should not be a point for consideration.

 

Good luck

Edited January 2, 2013 by Red Hot Chili Pipers

[RobertaSparrow]

Just to add....if you're on a temp visa (which your posts suggests you might be) then your foreign rental income/rebates don't count in Australia and you won't include them on your Oz tax returns.