Can Credit Card Debt Follow Me Overseas?
The following is presented for informational purposes only and is 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:
What happens to your debt when you leave the country?
Technically, nothing happens to your debt when you leave the country. It's still your debt, and your creditors and collectors will continue trying to get you to pay it back. Just as they would before, those efforts may include phone calls and letters. Missed payments will eventually begin hitting your credit report, likely causing your scores to drop. From the debt's perspective, not much has changed.
Eventually, your creditors may file a lawsuit in an attempt to collect your unpaid debts. If you don't appear in court or have a lawyer present to represent you, the case will almost certainly be decided in your absence (and usually not in your favor).
At that point, there will be a judgment against you, ordering you to repay the debt in question. If you have assets left in the US, including bank accounts or investments, your creditors may be granted the ability to seize those assets in an attempt to repay your debt. And if you continue working for a US-based employer, they could also garnish your wages.
Depending on the size of the debt, the creditor may choose to bring suit against you in your new country of residence. This would be a very costly effort, though, and would depend largely on the laws the country in question. Given all of that, it may not be worth it for the creditor.
Keep in mind, though, that if you're only leaving the country temporarily, the judgment may still be in place when you get back, meaning that your creditors will still have the right to seize wages or certain assets once you return.
Running from debt won't be easy
Establishing residency in a new country isn't easy, even under the best of circumstances. You'll need to go through an application process, which may include a review of your US credit report. If it seems like you're relocating in an attempt to dodge debts or other responsibilities, there's a very good chance that your application will be rejected.
You may also need to prove that you've got a steady income before you can establish residency. You either need a reliable source of monthly income (pay, pension, investments, etc.) that you can verify 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, which may be a challenge if you're overwhelmed with debt.
Another thing to keep in mind: you'll need to re-establish your credit history from scratch. If you’re trying to get away from debt, that may seem like a good thing, but borrowing with no credit history is difficult in any country. You can expect to live primarily on cash while you slowly rebuild your creditworthiness.
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 and an action plan to improve the situation.