While legal action is unlikely, the debts could hamper your everyday life on your eventual return if your credit score has deteriorated.
A run-in with the byzantine U.S. immigration system has forced reader Arun to leave the country after living and working here for more than six years.
He racked up credit card debt during a jobless stint while in the U.S. He’s been in India for the past two years while his green card application is pending, making only the minimum payments on his card.
Arun has not been approved for a temporary visa to return to the U.S., and he has run through the funds in his U.S. bank account. He is now concerned about maintaining good standing on the debt, and his credit status.
Communicate with creditors
Even though you are now halfway around the world, you could make use of the pervasiveness of communication technology and be proactive about communicating your situation to your creditors.
You could place a note on your credit report, for one, to explain that you were forced to leave the country and don’t have an adequate income in U.S. dollars to make your credit card payments. The Fair Credit Reporting Act allows you to put in a note to explain a financial setback or dispute a mistake.
That’s no guarantee a human will actually read this note or that it will lead to lenient consideration of any default, but at the very least you will feel better as a result of this proactive move.
David Waxer, financial wellness expert at GreenPath Financial Wellness, a credit counseling firm, notes, “This will not help the calculation of his credit score, but might give him some added consideration from a future U.S. creditor if he returns.”
You could also contact your creditors directly, explain your situation to them and see if they will agree to defer your payments for a little while.
See related: How an immigrant can build credit in the U.S.
Old debts have long shadows
It seems unlikely that your creditors will take legal action against you to collect on your credit card debt, considering the slim prospects of recovery and the costs involved to collect what could be a relatively small amount for them.
However, if you manage to work through your immigration issues and return to the U.S., there could still be consequences from your old debts. If this return takes place within seven years of any negative items about this debt (such as a missed payment or a collection item), your credit reports will still reflect that.
The impact of the negative items will be reflected in your lowered credit scores, and that will be an inconvenience as you continue your life in the U.S.
As you may know, credit scores rule the everyday lives of Americans in multiple ways, and your life as a credit pariah will not be a comfortable one.
You will be less favored by landlords, particularly large management companies, if you are looking to rent an apartment. You will get less-than-stellar rates on auto financing or home financing. You could even face higher auto insurance rates.
If you were to orchestrate this return after more than seven years of the tarnishing of your credit profile, the credit reporting bureaus will not be reporting these negative inputs. Your debts may well be held by debt collection companies at some point, in which case you could pay them off, or negotiate with them to settle for a lesser amount.
Debt settlement could have an impact on your credit score, but the impact would be larger in the case of more recent debt which is within a seven-year credit bureau reporting window for delinquency.
You may end up having to pay tax on any canceled debt, though. Debt collectors also face a statute of limitations on the time they have to file any suit against you to collect on the debt.
Creditworthiness could impact immigration outcomes
Another development to keep an eye on is a pending proposal from the Trump Administration to consider immigration applicants’ creditworthiness as part of an expanded vetting process.
This proposal aims to ensure immigrants do not become a public charge on the U.S. If this proposal passes, a credit check could well become part of the immigration vetting process. An immigrant would have to maintain at least an average FICO score, or a score close to the average, for U.S. consumers.
Arun, that’s all the more reason to prioritize staying current on your debts, considering you envisage a future in the U.S.