Bankruptcy – Can the courts reach your Bulgarian assets?

An increasing number of people are filing for bankruptcy in the UK courts in order to solve their insurmountable personal debts. It’s a common urban myth that anyone filing for bankruptcy will lose everything they own, but you might be surprised to hear that it is actually not the case. The courts will always allow you to retain ownership over your personal and household possessions, clothes, appliances as well as your main residence subject to number of dependents and the level of equity you have in the property. If you own luxury or expensive items such as sports cars or antiques, land or properties with high equity, then these will certainly be sold and the proceeds distributed to your creditors.

So what about your Bulgarian holiday home?

Property assets which are not your main residence are generally regarded as luxury items and sold off to the highest bidder. Worldwide assets are considered the same as UK assets, only the authorities will have a tougher time and a longer procedure accessing them. Eventually they too will be processed, which is becoming increasingly efficient for authorities within the EU.

What if you sell your Bulgarian property assets before you go bankrupt?

If you sell your assets at the full market price you can do this and fear no adverse repercussions, however if you sell your properties to an associated party, relative, friend or alike, or if the property is resold for under the true market value, then the UK courts have the authority to reverse any undersold transaction dating back 5 years before the bankruptcy filing. Whilst the process is relatively uncommon it is much more complicated when concerning jointly owned assets or assets owned via limited companies, but much simpler with those privately owned by a single individual.

The reality is that this is a risk for any buyer purchasing a bargain property: the vendor might actually be verging bankruptcy and at some point in the next five years a court order could be initiated to reverse the transaction to return the asset to the creditors for resale at the full value. How often does this actually happen for Bulgarian properties? Well, we cannot say with certainty, however we at New Estate are frequently liaising with the government’s ‘Department of Enterprise, Trade and Investment’ who process insolvencies. If a property sold by us in Bulgaria has previously been the asset of a UK bankrupt, it is common practise for them to check with us when it was sold, for how much, where the funds were paid and to whom etc. Most crucially, they always want to be sure that we believe the property was sold for the most the market can offer and was not undervalued.

Should you believe that bankruptcy might become a reality for you in the coming 5 years and you are selling a Bulgarian property, be sure to use a professional agency who can provide proof that a certified evaluator has considered the property’s value, that it had sufficient time on the market to gain the maximum possible market price, that purchase contracts were sign and that the full proceeds of the sale were received by you via bank transfer and not a third party by cash or other payment.

For more information on insolvency and its potential impact on your Bulgarian assets, please feel free to contact us directly.