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 leaving the country isn't the best solution and comes with a few significant problems. So if you're thinking of leaving the country and starting over fresh, 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, yourcreditors may file a lawsuitin 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.
The fallout from your debt may follow you
Establishing residency in a new country isn't easy, even under the best of circ*mstances. 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 your debt is keeping you up at night, let our experts help. We offer free financial counselingto help you understand all of your options. We also offer debt management plans(DMP) to help reduce your interest rates, create an affordable monthly payment, and save a massive amount of money.
FAQs
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.
Can credit card debt follow you to another country? ›
While debt technically won't follow you abroad, you may suffer several consequences for trying to flee from it: you may be sued and have your wages garnished; your credit score will suffer; you may have to pay taxes on your debt. These are just a few consequences of leaving the country with unpaid debt.
Can bad credit follow you in another country? ›
Your credit score will not follow you to another country, but your financial situation, including your debt levels and income, will still play a pivotal role. Creditors cannot share your financial information abroad and different countries have different standards for assessing creditworthiness.
Can debt be collected internationally? ›
Three different methods can be chosen to proceed with international debt collection, depending on the circ*mstances of the particular case: International commercial arbitration. International debt collection out of court. International debt collection in court proceedings.
Can a company from another country send you to collections? ›
Yes, the laws of the country, where the debtor is located, are applied for activities of international debt collection agencies. This is the reason why most international companies choose local representatives for entrustment of debt collection claims.
Can creditors come after you in another country? ›
Leaving the country doesn't absolve you of your responsibility to pay your debts. If you stop making payments, your creditor could sue you and garnish your U.S.-based assets. Your credit history will also take a significant hit.
Does your debt get wiped if you move abroad? ›
Your debts don't disappear and you still have an obligation to repay them. However, if your move abroad is genuine, just make sure to be communicative with your credit card issuer and/or debt collectors.
Is credit card debt forgiven after 7 years? ›
Does credit card debt go away after 7 years? Most negative items on your credit report, including unpaid debts, charge-offs, or late payments, will fall off your credit report seven years after the date of the first missed payment. However, it's important to remember that you'll still owe the creditor.
Does my credit score affect me in another country? ›
So Credit Reference Agencies don't have standardised, international credit reports for individuals. They can only collect data about your borrowing in the country where they are based. If you move abroad, you will essentially be back to square one when it comes to your credit score.
Can you travel if you have debt? ›
Taking that much needed vacation while on a debt payoff journey may seem impossible, but it doesn't have to be. By planning a vacation that suits your budget and keeps goals on track, you can transport yourself somewhere new and recharge.
A sovereign default is a nation's failure to repay its debt obligations. It has serious economic consequences for the nation, making it expensive or impossible for it to borrow money in the future. It also causes domestic turmoil.
What is the statute of limitations on international debt? ›
Depending on the nature of the case, the Statute of Limitations can range from 6 months to 15 Years. prosecute the claim in court. At the same time, the debtor is still obliged to fulfill his obligation.
Can UK debt be enforced in the USA? ›
Enforcement of a Foreign Judgment in the U.S.
Under U.S. law, an individual seeking to enforce a foreign judgment, decree or order in this country must file suit before a competent court. The court will determine whether to recognize and enforce the foreign judgment.
Will my debt follow me to another 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.
Can I pay the company instead of the collection agency? ›
If you have delinquent debt that's been sent to collections, there might be options. In some cases, you may still be able to negotiate repayment directly with your lender. Working with your original creditor instead of a debt collector can be beneficial. However, this approach won't work for everyone.
Can US debt collectors collect in the UK? ›
Can debt collectors chase you overseas? Yes they can, but as Carl Wimer states the further away they go the more expensive it becomes.
Do I have to tell my credit card company I m leaving the country? ›
You might need to notify your credit card issuer before a trip if they don't have fraud detection technology that recognizes when you travel.
What happens if you ignore credit card debt? ›
An account in collections
If 180 days go by and you still haven't paid your credit card's minimum payment, the issuer can charge off your account. This means that the creditor closes your account to future purchases and writes your debt off as a loss. You're still responsible for paying the amount owed, though.
