If you’re thinking of moving abroad, it’s important to know what will happen to your unpaid credit card debt. In truth, your debt doesn’t magically disappear when you move, but debt collection does become more challenging for issuers if you leave the country. Because of each country’s unique credit systems and regulations, it can be difficult for creditors to track you down. This might make moving abroad seem like an attractive solution to avoiding debt repayment. But ignoring your problems does not make them go away and your credit card issuer, debt buyer or debt collection agency will continue to make efforts to get you to pay as they normally would, which could lead to severe long term consequences.
How Will Your Credit Card Issuer Reclaim Your Credit Card Debts?
Collection Activities
Credit issuers will normally carry out collection activities such as making collection calls and sending letters requesting payment once there is a default on a credit card debt. These collection activities often last for about 30 to 90 days after which they send the defaulted debt to a debt collection agency.
Collection agencies are knowledgeable about debt collection laws in various countries. Therefore, your credit card issuer will most likely hire a debt collector with a partner agency in the country you have moved to counter the limitation or non-existence of their rights to chase you for the debt you owe.
The debt collection agency will be hired under a contract for a set period, to send demand letters and call you to pay off your debt. If this collection agency is unsuccessful, your credit card issuer will assign your debt to another collection agency, and so on. So, you might have numerous collection agencies contacting you regarding your debt.
Even after many years, your credit card issuers might sell your defaulted debt to a debt buyer who would use any allowed tactics to get you to pay up. Debt buyers purchase thousands of defaulted accounts at discounted prices and may decide to offer favorable or not-so-favorable settlements. Bear in mind that when accounts get sold or transferred it can become quite complex and difficult to handle, so you might want to ensure it doesn’t come to this.
Collection Lawsuits
If a lawsuit is eventually filed to collect your unpaid debt, it will be filed in the name of your original credit or the debt buyer who purchased your debt and not the debt collector. Typically, a lawsuit is filed in the country or state where the debtor lives. This is particularly true if legal proceedings started before you left the country.
Let’s say you were living in the state of Texas when the lawsuit was served and filed, a Texas court would hear the case even if you moved abroad before the case was settled. The case will move forward even if you don’t appear in court or have a lawyer available to represent you. This may cause the judge to enter a default judgment against you, meaning an automatic win for your credit card issuer or debt buyer.
Assets that have been left behind such as bank accounts might be within the reach of a civil court action. Your credit card issuers are given the right to take these assets without your permission in an endeavor to repay your debt. Also, your wages can be garnished if you still work for a company based in your previous country of residence until your debt is completely paid.
Depending on how willing your credit card issuer is to make you pay, the lawsuit may be brought to your new country of residence if you left before the lawsuit was filed. However, the chances of a suit being filed internationally over small credit card debts are slim as the credit card issuer’s or debt buyer’s success relies mostly on the country’s laws and its cooperation with the debtor’s prior country of residence.
Why You Shouldn’t Move Abroad With Unpaid Credit Card Debt
Your Credit Score Will Be Affected
The biggest reason why people pay their credit card bills on time is to maintain a good credit score. Moving abroad with unpaid credit card debts may not look like a big deal, especially when you don’t have assets your credit card issuers can seize. Nonetheless, your credit score will negatively be affected by your inability to pay the debt. And on your return, you’ll be stuck with that impacted score.
Credit scores are almost irrelevant outside the United States, therefore, you will be starting a new credit history when you move to a new country. In most countries, you may not be able to acquire any kind of credit until you have lived there for a designated period of time. This means you might have to continue using your local credit card which may be difficult if you have large outstanding debts. Your bad credit score might make it difficult to start a new life in another country—you could need credit for things like securing a loan to buy a home or car.
You Will Have To Pay Taxes on Your Debt
At some point, you may no longer have creditors running after you to pay your credit card debts. This is because, after some time, your credit card issuer eventually writes off your debt. Once your debt has been written off, the IRS sees it as income which they expect you to file tax returns on and pay. For example, if you owe your credit card issuer some $20,000 and never pay, the IRS will regard this $20,000 as income that you are required to pay taxes on.
You Could Lose Your Passport
To get you to pay your taxes, the State Department may revoke your current passport, deny you a new one, or issue you a limited passport to make sure you come back. Since an IRS or State tax debt can lead to the suspension of your driver’s license and passport, it is important to know what type of debt you have before you start running from it.
Paying Your Debt Is the Right Thing To Do
There is no better way to avoid the unrelenting collection tactics creditors and other involved parties are willing to utilize than paying up your credit card debt. While you may be able to escape paying your debt by moving abroad, you expose yourself to financial problems that will come back to torment you.
Credit card debts can feel like a huge weight resting on your shoulders, but running away isn’t the smartest way to handle the situation. Simply because you’ve left the country doesn’t make the contract between you and your credit card issuer void. Your debts technically don’t disappear and you still have an obligation to clear them.
However, if your move abroad is genuine and you have been communicative with your credit card issuers, they will tend to be less aggressive when contacting you regarding your debt payment. To read more click here.