As of March 2012, outstanding UK personal debt was £1.458 trillion and each UK adult owed an average of £29,681 including a mortgage. This situation is stressful in itself but when compounded with an overseas move, can be downright overwhelming. It would be nice if a move abroad could leave behind baggage like UK debt. However, things are not that simple so UK residents should understand the effects that leaving debts behind can have.
Each country uses different methods to calculate consumer credit score. This means that your UK credit score will not likely tag along to the new country. However, it will also not go away and allowing UK debts to go unaddressed will only worsen the score. Lenders may add missed payment charges and continue to accrue interest, substantially increasing the debt. If you ever move back to the UK, getting reestablished from a financial perspective may be difficult.
Creditors may track down an individual who moves abroad and will expect payment of the UK debt. Due to advances in technology, moving is not often enough to keep creditors from finding someone. Many lenders have offices across the world so applying for credit in the new country could put an individual with UK debt back into the spotlight.
Creditors in the UK can take several actions against UK debtors who have moved abroad, no matter how long ago it was. A creditor may pursue a County Court Judgment or make the debtor bankrupt. Some creditors could sell the debt to a collection agency in the new country of residence, which will then pursue the debtor for repayment.
If you have already moved abroad and have lived there for less than three years, it may be possible to establish an Individual Voluntary Arrangement from the new country. A UK debt management plan can be arranged from another country no matter how long the debtor has resided outside of the UK. Lenders are likely to agree to one of these programs if they see it as the most realistic way to recoup their money. Declaring yourself bankrupt will probably require you to return to the UK for the legal proceedings.[needhelp01]
Though there are no travel restrictions during or following bankruptcy, the Official Receiver must be informed of a change in address during the first 12 months of the bankruptcy. In addition, if the individual already has bank accounts in the destination country, these will be frozen during a UK bankruptcy. Individuals in UK bankruptcy are not permitted to use new credit, which will make it difficult for them to purchase property in another country.
Though each of these debt solutions can impact the UK credit score for as long as six years, clearing the UK debt is recommended. This holds true even if there are no plans to return to the UK. It is not worth taking the chance of not being found by creditors, especially in this technological age. Eliminating UK debt before or shortly after moving abroad will make the new life a less stressful one.