What happens to unpaid credit card debt if you move abroad?
Leaving the country and your credit card debts behind could come back to haunt you
Thinking of leaving the country -- and your credit card debt -- behind? While you may be able to get away with it for now, you might be setting yourself up for a financial nightmare in the long run.
One of the biggest motivators Americans have for paying their bills on time is to keep their credit scores intact. After all, credit scores impact everything from mortgages to car loans to insurance rates. But if you move overseas, your credit history in the United States typically has no bearing since other countries have their own systems for judging borrowers' creditworthiness.
But while it may be tempting to skip out on your debt, thinking your credit card issuer can't touch you overseas, doing so could create a bigger headache later on, experts warn.
While it's unclear how many people actually do default on their debts by leaving the country, some recent statistics in Dubai suggest that it has become more prevalent since the economic downturn. Last year, bank officials there estimated that as many as 2,500 customers left that country with unpaid credit card bills each month, starting over in a new place with a clean financial slate.
"Most individuals moving to a new country start a credit history through the traditional means," says Norm Magnuson, a spokesman for the Consumer Data Industry Association, an international trade association for credit reporting agencies based in Washington, D.C. "They may get a charge card from a bank or lending institution in that country or apply for a card from a retailer and continue to build their credit there."
While it's not impossible that a foreign lender would request a copy of a U.S.-based credit report, it's unlikely, Magnuson says. "Generally those reports cost quite a bit more because you've got to request them from a specialized bureau overseas that will gather the information. So, from a practical standpoint, you're probably not going to find too many companies willing to do that."
The cost of overseas enforcement is going to be prohibitive to most credit card companies and junk debt buyers.
The lawsuit equation
If you don't pay your credit card debt and a lawsuit is served and filed before you move overseas, it would move forward in your absence. "Typically in the United States, a lawsuit would be filed in the state or county where the debtor lives," says William "Mike" Troglin, a Norcross, Ga.-based bankruptcy attorney. So if you're living in, say, Georgia when the lawsuit is filed, a Georgia court would hear the case even if you moved to a foreign country before the case was resolved.
However, that court would likely not be able to force you to pay the debt once you've relocated to another country, though creditors might be able to go after any loose ends you've left in the United States. "If the person leaves behind any kind of checking or savings accounts, they might be within reach of a civil court action," says Bruce McClary, a spokesman for Richmond, Va.-based ClearPoint Credit Counseling Solutions and a former debt collector. Likewise, if you move overseas but continue working for a U.S.-based company, there's the possibility that your wages could be garnished if that was part of the court ruling, since your employer would be subject to U.S. laws.
If a lawsuit has not been filed before you move overseas, things get a little trickier. "If a company is owed a debt, they have to bring suit in a foreign country's court of law and abide by their rules and procedures," says Rachel Hunter, an attorney in Cary, N.C., who specializes in debt collection. "That means they will have to hire counsel in that area. A person would have whatever rights and defenses he would usually have."
Companies could also file a U.S. suit against a person living abroad, Hunter says, but that company's success would depend on the country's legal system and whether it would cooperate with the United States.
But the odds of a suit being filed internationally over credit card debt are relatively slim, experts say. "The cost of overseas enforcement is going to be prohibitive to most credit card companies and junk debt buyers," says Hunter. "Nobody is going to go to Europe, Asia, Latin America or some other place for a $2,000 or even $20,000 debt. In addition, it may be difficult to locate a person who is living abroad, although there are companies that will provide international skip trace services in certain countries."
Reasons to pay
So with the odds of credit card issuers recouping their losses relatively slim, why would you want to pay up? First of all, it's the right thing to do.
Secondly, a move to another country would mean you'd be starting your credit history over from scratch, so you may want to continue using your American-based credit cards in the interim.
Having the ability to do that may be reason enough to pay your U.S.-based debts and keep your credit intact.
Finally, there is one more thing you should consider.
Though Claudine Williams, a 39-year-old teacher and travel writer who relocated from Atlanta to Busan, South Korea, in August of 2009, had no immediate plans to return to the United States, she paid off as many bills as possible before leaving and is keeping her remaining bills current. "I don't want to lose my assets or find myself in more of a financial bind if I ever return to the United States," she says.
Candy Wright, group manager with Farmington Hills, Mich.-based GreenPath Debt Solutions, says that's a wise move. If you leave debts behind while living overseas, it may go into collections or eventually be charged off, but both of those actions would have a negative mark on your credit report. "If you move back it would likely haunt you and you'd be in far worse shape," Wright says.
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