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Getting a credit card and other types of loan is relatively easier in the US compared to some countries. In the second quarter of 2022 alone, the Federal Reserve Bank of New York reported 233 million new accounts, the highest seen since 2008.

The loans offered to Americans are also available to Non-US citizens, both immigrants and non-immigrants. So, it’s not unusual for non-citizens to accumulate debts throughout their stay in the US. For instance, some may have to go through health emergencies. Similarly, other may just have a hard time keeping up with the bills. So, what can you do if you find yourself in unaffordable debts? Better yet, can you leave debts behind when you go back to your home country?

Bankruptcy in the US: What it is and who can file?

Indeed, debts can potentially pile up on you while staying the US. However, you can also get relief from these debts using different methods. Fortunately, the US extends its debt-relief resources to most people. In fact, even non-US citizens who may just be staying in the US temporarily can also avail of these resources.

Under Section 109(a) of the US Bankruptcy Code, both citizens and non-citizens can avail of the bankruptcy protection. To qualify, they just have to meet one of the following requirements:

  • Resides in the USA; or
  • Owns a home or domicile in the USA; or
  • Maintain a place of business in the USA; or
  • Have property in the USA.

What if you’re a non-US citizen and have already exited the USA? Great news, you may still be qualified to file for bankruptcy as long as you still have a property left in the US. Some districts would consider your bank account sufficient for filing bankruptcy. Use our free Chapter 7 vs Chapter 13 calculator below to see if you may qualify.

Why file for Bankruptcy?

The protection offered by bankruptcy allows debtors to manage unaffordable debt and have a fresh start. So, if your loans accumulate beyond your ability to pay, bankruptcy can be an option for you. Fortunately, you may be qualified regardless of your citizenship or immigration status.

As soon as you file for bankruptcy, Automatic Stay takes effect, as described in Bankruptcy Code Section 362. In other words, your creditors, with a few exceptions, cannot pursue any debt collection activity against you. After filing bankruptcy, the court puts a temporary stop to any pending foreclosure, repossession, wage garnishment, lawsuits, and collection calls. Depending on your situation, it may wipe out a significant amount of your debts. Moreover, it can provide you with a more affordable payment plan to help you pay off your debt.

Do you have to file bankruptcy when you’ve left the US?

Filing for bankruptcy is a possible and oftentimes beneficial debt relief path for non-US citizens. On the other hand, it may not be necessary or prudent in certain situations. People usually file for bankruptcy for the protection offered by Automatic Stay, a federal court order that temporarily bars creditors’ collection efforts. This helps avoid or stop wage garnishment, lawsuits, foreclosure, repossessions, and even constant collection calls. But if you are outside the US and you’re not planning on coming back in a few years, you may not really need Automatic Stay to protect you.

Creditors don’t usually follow debtors who leave the US because international debt collection activities can be very expensive. If you don’t have any property left in the US, they won’t have anything to foreclose. Unless you’re still working for a US company, they won’t be able to garnish your wage either. The same is true with your bank account. Unless you have a significant amount of money in your US bank account, your creditors won’t be able to touch it. So, if you haven’t left anything in the US that your creditors might take from you, you may not really need to file for bankruptcy at all.

Why you may want to file bankruptcy even when you live abroad:

For some debtors, filing for bankruptcy may not be the most practical thing to do when leaving debts behind. However, if any of the following applies to you, bankruptcy may be worth looking into:

  • If you have an asset (home, car, investments, bank account, etc.) in the US that you want to protect from being seized;
  • If you are working for a US-based company (as they can garnish your wage); or
  • If you plan on coming back to the US soon.

If you leave your debt in the US, it may potentially just expire after a few years. This will depend on your state’s Statute of Limitations. When creditors sue you in your absence, they may be able to get a judgment against you. As a result, they can seize any asset you have left in the US. Likewise, they can garnish your wage from your US-based employer, as well as extend your debt’s expiration date. Additionally, your creditors can still sue you in the future even if you seem to be judgement proof now. In fact, they may resume their collection efforts when return to the US before the statute of limitation has expired.

Can you file bankruptcy abroad?

As long as you satisfy at least one of the requirements stipulated in Section 109(a) of the US Bankruptcy Code, like having an asset in the US, you will be able to file bankruptcy from another country. Although, before deciding to file, you should definitely consider the fact that the court may require you to attend the meeting of the creditors in person. This means that you may have to travel back to the US and incur additional expenses in travel and lodging.

Where can you file Your bankruptcy case?

Under Federal Venue Laws (28 U.S.C. 1408), you will have to file in the district where you lived (resided or domeciled). It can also be the district where your principal place of business or principal assets are located within the USA for the greater part of the 180-day period prior to filing your bankruptcy case. 

What if you’ve been living abroad for more than 180 days? Then you will have to file in the district where your principal assets in the USA are located during the greater part of the 180-day period prior to filing your bankruptcy case.

How do you file for bankruptcy abroad?

Once you’ve decided that bankruptcy is right for you, you may try to connect with an attorney to help you through the process. The bankruptcy attorney can look at your income and other data to determine what type of bankruptcy you would qualify for. Most likely, you may be filing for chapter 7 or chapter 13 if you’re filing as an individual.

The next major step is to attend a pre-bankruptcy credit counseling session, which you can conveniently do online. For this, you will have to find one which is organized by a government-approved provider and is recognized in the district where you are filing in. After the credit counseling session, you can then get a certificate which you will need to file with your Voluntary Petition (Form 101), together with the filing fee.

After that, you will have to file bankruptcy in your local courthouse. This may mean that you’ll have to travel back to the US to do the filing in person. There might be a chance of you being able to do it outside of the USA due to the current COVID restrictions but it’s best to consult with your attorney about this as things could change very quickly.

After filing, the court will give you the name of the trustee assigned to your case. You will also get the date and time that you will be meeting with him or her. This meeting is called the Meeting of Creditors or the 341 meeting, which you will also have to attend in person. At this point, you would already be enjoying the protection offered by automatic stay.

How does bankruptcy affect my immigration status?

Undocumented immigrants- While it is legal for undocumented immigrants to file for bankruptcy in the US, it may pose a unique challenge as you will need to provide a social security number or an ITIN to prove your identity to the court. Also, your bankruptcy petition becomes a public record, which means that anyone can access it and learn important information about you. So, if you’re an undocumented immigrant, you should speak with an immigration attorney first before filing for bankruptcy.

For people planning on applying for citizenship- Filing for bankruptcy will be reflected in your credit report and USCIS will be looking at that to determine whether or not you might potentially become a public charge or if you possess a good moral character. However, a bad credit report doesn’t really predict that a person would be a public charge in the future. So, although a bankruptcy filing may not be flattering on your credit report, it won’t be the reason for USCIS to deny you citizenship.

For those who want to sponsor relatives– During the course of your bankruptcy, you may not be able to sponsor anyone to come into the US. However, once you’ve been discharged, you will be able to sponsor a relative again.

So, should you file bankruptcy when you’re abroad?

Having considered what bankruptcy looks like for non-citizens, as well as the potential challenges of filing, it is prudent to weigh its pros and cons before doing anything about it. Will it really be helpful to file? Is the dischargeable debt worth the filing fee and the expenses you will incur if you’re required to travel back to the US? Do you have assets and income you’re trying to protect? Would it be more advantageous to file for bankruptcy once you get back to the US later on? It is important to weigh your options and see if you can afford not to file bankruptcy as there are also other options available to give you debt relief.

Post Author: Ascend

Group of guest writers and industry experts who have specific expertise in Chapter 13 bankruptcy, Chapter 7 bankruptcy, debt relief, debt settlement, and debt payoff.

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