Obtaining a credit card and other types of loans is relatively easier in the US compared to some other countries. In fact, in the second quarter of 2022 alone, the Federal Reserve Bank of New York reported a record high of 233 million new accounts, the highest seen since 2008.
It's worth noting that the loans offered to Americans are also available to non-US citizens, both immigrants and non-immigrants. As a result, it's not uncommon for non-citizens to accumulate debts during their stay in the US. For example, some may face unexpected health emergencies or struggle to keep up with bills. If you find yourself in unaffordable debt, what can you do? And can you leave debts behind when you return to your home country?
Bankruptcy in the US: What it is and who can file?
It's true that staying in the US can lead to accumulating debts, but there are ways to address this issue. Fortunately, the US provides debt-relief resources to most people, including non-US citizens who are temporarily staying in the country.
According to Section 109(a) of the US Bankruptcy Code, both citizens and non-citizens can take advantage of bankruptcy protection. To qualify, you only need to meet one of these requirements:
- You reside in the USA
- You own a home or domicile in the USA
- You maintain a place of business in the USA
- You have property in the USA
But what if you're a non-US citizen who has already left the country? The good news is that you may still be eligible to file for bankruptcy, as long as you still have property in the US. Some districts even consider your bank account as sufficient for filing bankruptcy. Use our free Chapter 7 vs Chapter 13 calculator below to determine if you qualify.
Why file for Bankruptcy?
If you find yourself drowning in debt with no way out, bankruptcy might be a viable solution. It offers protection to debtors and a chance to start anew. The best part is that anyone can qualify, regardless of their citizenship or immigration status.
Once you file for bankruptcy, the Automatic Stay comes into effect, as per Bankruptcy Code Section 362. This means that your creditors, with a few exceptions, cannot take any action to collect on your debts. The court also puts a temporary hold on any pending foreclosure, repossession, wage garnishment, lawsuits, and collection calls. Depending on your situation, bankruptcy may even eliminate a significant portion of your debt. Additionally, it can provide you with a more affordable payment plan to help you pay off your remaining debts.
Do you have to file bankruptcy when you’ve left the US?
If you're a non-US citizen struggling with debt, filing for bankruptcy can be a helpful solution. However, it may not always be necessary or practical. Typically, people file for bankruptcy to take advantage of the Automatic Stay, which temporarily stops creditors from collecting debts. This can prevent wage garnishment, lawsuits, foreclosure, repossession, and harassing phone calls. But if you're living outside of the US and don't plan on returning anytime soon, you may not need this protection.
When debtors leave the US, creditors typically won't pursue them due to the high cost of international debt collection. If you don't have any assets in the US, there's nothing for them to foreclose on. Unless you're still employed by a US company, your wages can't be garnished. The same goes for your US bank account. Unless you have a significant amount of money in it, creditors can't touch it. So, if you haven't left any assets in the US that creditors could go after, filing for bankruptcy may not be necessary.
Why you may want to file bankruptcy even when you live abroad:
Bankruptcy may not be the best option for everyone trying to leave their debts behind. However, if you have assets in the US that you want to protect from being seized, are working for a US-based company, or plan on returning to the US soon, it may be worth considering.
If you choose to leave your debt in the US, it may expire after a few years depending on your state's Statute of Limitations. However, if creditors sue you in your absence and obtain a judgment against you, they can seize any assets you have in the US and garnish your wages from your US-based employer. They can also extend the expiration date of your debt and sue you in the future, even if you seem judgement proof now. If you return to the US before the Statute of Limitations expires, they may resume their collection efforts.
Therefore, bankruptcy can be a way to protect your assets and wages from being seized by creditors. It can also provide relief from debt collectors and stop lawsuits from being filed against you. However, it's important to weigh the benefits and challenges of bankruptcy before making a decision.
Can you file bankruptcy abroad?
If you have an asset in the US, you can file for bankruptcy from another country, according to Section 109(a) of the US Bankruptcy Code. However, it's important to note that the court may require you to attend the meeting of the creditors in person before approving your case. This means you may need to travel back to the US and incur additional expenses for travel and lodging. So, before deciding to file, it's essential to consider these potential costs.
Where can you file Your bankruptcy case?
If you're considering filing for bankruptcy, it's important to know where you should file. According to Federal Venue Laws (28 U.S.C. 1408), you'll need to file in the district where you resided or were domiciled. Alternatively, you can file in the district where your principal place of business or principal assets are located in the USA for most of the 180-day period before filing your case.
But what if you haven't been living in the USA for the past 180 days? In that case, you'll need to file in the district where your principal assets in the USA are located for most of the 180-day period before filing your bankruptcy case.
How do you file for bankruptcy abroad?
If you've decided to file for bankruptcy, the first step is to connect with a bankruptcy attorney who can assist you through the process. The attorney will review your income and other information to determine which type of bankruptcy you qualify for. As an individual, you'll most likely file for chapter 7 or chapter 13.
Next, you'll need to attend a pre-bankruptcy credit counseling session, which you can conveniently complete online. Make sure to find a government-approved provider recognized in the district where you're filing. Once you complete the session, you'll receive a certificate that you'll need to file with your Voluntary Petition (Form 101) and the filing fee.
After that, you'll need to file for bankruptcy at your local courthouse. This may require you to return to the US to file in person, but due to COVID restrictions, there may be exceptions. It's best to consult with your attorney about this as things can change quickly.
Once you've filed, the court will assign a trustee to your case and provide the date and time for the Meeting of Creditors or the 341 meeting. This meeting is where you'll meet with the trustee and is required to attend in person. At this point, you'll already be protected by automatic stay.
How does bankruptcy affect my immigration status?
If you're an undocumented immigrant in the US, you're legally allowed to file for bankruptcy. However, it can be a bit challenging as you need to prove your identity to the court by providing a social security number or an ITIN. Additionally, your bankruptcy petition becomes a public record which means that anyone can access it and learn important information about you. Thus, it's best to consult an immigration attorney first before filing for bankruptcy.
For those planning to apply for citizenship, filing for bankruptcy will reflect on your credit report, which USCIS will review to determine if you might potentially become a public charge or if you possess good moral character. Although a bad credit report doesn't necessarily mean that you'll be a public charge in the future, it's not flattering on your credit report. But, it won't be the sole reason for USCIS to deny your citizenship.
If you're planning to sponsor a relative to come to the US, you may not be able to do so during the course of your bankruptcy. However, once you've been discharged, you'll be able to sponsor a relative again.
So, should you file bankruptcy when you’re abroad?
Before making any decisions about bankruptcy as a non-citizen, it's important to consider both the benefits and drawbacks. Is filing for bankruptcy worth the cost of the filing fee and potential travel expenses back to the US? Are there assets or income you're trying to protect? Would it be better to wait and file for bankruptcy once you're back in the US? It's crucial to weigh all of your options and determine if bankruptcy is truly the best solution for your debt relief needs. Keep in mind that there may be other alternatives available to you as well.