A common question asked by expats is what happens to any debts they leave behind in another country.
It’s well known that credit checks are country based, so on moving from the UK overseas or from a foreign country back to the UK, your credit record does not generally follow you.
But that does not mean banks and finance companies cannot act through the courts in the country where you live.
The deciding factor for the money men is if they can win their case – and if so, what’s the cost and can they get their money back.
Instinct means many expats avoid their banks if they fall into money problems when they should pick up the phone or drop into a branch to talk about their finances.
Handing in keys
In Britain, regulators have told banks and finance companies to exercise discretion when dealing with people in financial difficulties, especially if their homes are at risk.
Where property is involved, the temptation is to hand in the keys and walk away from the problem.
Unfortunately, this is generally a temporary reprieve and, in some cases, foreign lenders in countries such as Spain and Cyprus have obtained court orders in the UK against borrowers who have returned home.
In Spain, like in Britain, lenders can place a charge against a home which means the debt is cleared first when the property is sold. This can leave the seller short of funds if they are relying on the money as a deposit for another purchase.
New trend for lenders
The debt will be settled with interest and costs, which bumps up the amount owed to an unexpected level.
Debt management firms are also warning of a new trend that impacts British expats in Spain.
In some cases, the expats have stopped paying their UK mortgage against a property in Spain and lenders have issued a default notice against them.
When the borrowers than look for credit in Britain, they will be rejected because few lenders will offer a loan, card debt or mortgage to someone with bad credit on their file.
Defaults are quicker, cheaper and easier for finance companies to register as they do not have to go to court to file them.
