Are you deep in debt? Thinking of heading off to a remote tropical islands far away from the jurisdiction of the United States, where no one knows your name (or your credit score?) Can you really erase your debt just by leaving the country?
Well, yes and no, but that doesn’t make it the easy — or most desirable — choice for most people. Let’s explore some of the facts of moving abroad to avoid paying off U.S. credit card debt.
1. Your U.S. credit score doesn’t go with you when you move overseas. Your U.S. credit score is compiled from information from the three major, U.S.-based credit reporting agencies: Experian, TransUnion and Equifax. While it’s theoretically possible a foreign country could request your FICO score and/or U.S.-generated credit reports, it’s not likely. It’s more costly and not worth the trouble if you’re looking to open a new revolving credit account.
2. You won’t have a credit score in the new country. Even if your bad credit doesn’t go with you to the new country, you won’t have any credit history there at all. No credit makes it almost as difficult as bad credit to get credit cards, find a job, or rent an apartment. The best way to build your credit in a foreign country is to start with a secured credit card or a store credit card. In the meantime, it’s a good idea to keep payments current on your U.S.-based cards so you can continue using them.
3. You can still be harassed by bill collectors about unpaid debt, even if you move overseas. Chances are, most companies or debt collectors won’t go through the expense and trouble of tracking someone down overseas. But the Internet and social media has truly created a global community. The odds that debt collectors will track you down in a foreign country is greater than it was, for instance, 10 years ago.
If you leave behind assets such as a checking account or investments when you move, your creditors can dip into those accounts to pay your debt. Similarly, if you relocate but are working for a U.S.-based firm, the rules do not apply — your creditors can garnish your wages in the same way they could if you lived in the states.
If there is a lawsuit against you before you decide to move, your creditors can still pursue the legal action, which could mean you have to come home for the trial. However, they probably won’t be able to collect the debt since you’re protected by the laws of your new country of residence.
Similarly, if you move before a lawsuit has been filed, your creditors have to file a lawsuit based on your new country’s laws and regulations. This can get complicated and expensive, so most companies would avoid it. If they due sue you, they probably won’t be successful in collecting your unpaid debts.
Chances are, you really can move to another country and avoid paying the debt you accumulated here in the States. But if you ever want to come back home, your credit rating will be ruined for at least 10 years from the time your last creditor has decided to charge off your debt. Your creditors might decide to keep the accounts open in the hopes that you’ll pay some day. If that’s the case your credit score could drop down below 400 with so many months of delinquencies. Having debt can create a lot of stress, and if you move overseas, you may live every day wondering if your U.S. debt will catch up to you. It’s worth it to make attempts to pay or negotiate a debt settlement with your creditors rather than living with the stress of unpaid debt; that much stress can really hamper the carefree lifestyle of tropical island living.
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Dawn Allcot is a full-time writer, editor and blogger whose career spans two decades. Dawn joined the CreditShout team nearly two years ago. Since then, she's been sharing her knowledge and enthusiasm for managing credit and saving money through responsible credit card use.
January 8th, 2012 at 8:06 pm
If there are no assets, why not just go for bankruptcy and start from scratch?
Another approach for those without assets is to file for bankruptcy before departing, and then spend much of the next years abroad. While sitting on a beach in Thailand living off of $200/month, one needn’t any credit cards, car, etc. 8 years later you can return to the States, if you still care to, and within two years you can buy a home.