Can Credit Card Debt Follow Me Overseas?
The following is presented for informational purposes only and if not intended as legal advice.
If you’re heavily in debt and don’t see a way out, moving to another country may seem like an appealing way to start over. But it’s not as easy as you may think and it comes with a few problems you may not find appealing. If it’s something you’re thinking about, here’s what you need to know:
You Need Cash
In addition to your travel and housing arrangements, you’ll need to show a steady income to establish residency. You either need a reliable source of monthly income (pay, pension, investments, etc.) that you can prove or you need to “buy” your way in by investing in real estate or a business. Either way, you need to prove you have cash resources to apply for residency.
You May Need to Stick with Cash
One of the downsides to relocating to another country is that your credit report doesn’t follow you. If you’re trying to get away from debt, that can seem like a good thing. But you will need to establish a brand new credit history from zero and most countries don’t make it as easy as the US.
In the United States you can receive a loan for a house or car with very little down and a small income. Not so in other countries. They have stricter credit reporting guidelines and don’t give loans or credit cards with as much ease.
Beware of the IRS
While you may be able to get away from a lot of your debt, the IRS can still come after you for taxes. If you have unpaid credit balances when you move, those balances may eventually be canceled (more on that in a moment) and reported to the IRS, at which point the unpaid debt may be considered part of your income. If you owe more than $600 to any one company, if it’s canceled, forgiven, or discharged in a bankruptcy, it can potentially be considered income.
So, what happens to that debt when you leave the country?
For starters, your debt collectors can file a lawsuit. If they are already in the process of filing or file before you leave the country, it would still go before a judge and be decided in your absence. If that happens, while the court may not be able to force you to pay since you’re overseas, the debt collector can go after any money you leave behind in a checking, savings, or investment account. And if you continue working for a US-based employer, they can garnish your wages.
If you’ve already left the country, depending on the size of the debt, the company may choose to bring suit against you in the country of your residency. They will hire counsel there and the case will be decided based on the laws in that country. Since that comes with a hefty price tag for the debt collector though, it may not be worth it to them.
Something else to keep in mind – when deciding your eligibility for residency, another country may review your US credit report. If they believe you are moving to simply get out of debt and avoid your creditors, your application may very likely be denied.
Although it may seem like a good idea to move to get away from your debt, it does come with problems and these problems can make it near impossible for you to get residency in another country. You’re better off handling your debt right where you are.
If you’re in a place where your debts are frightening enough to make you consider fleeing the country, please take a moment to speak with a trained credit counselor. Debt counseling is free and can provide you with an unbiased assessment of your situation, as well as next steps and solutions you may not have been aware were possible.
Updated February 2020