Does Credit Card Debt Follow You to Other Countries?

Date Published: Sep 03, 2024
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Packing up and moving to another country might feel like a fresh start, but it won’t magically disappear your credit card debt. If you think a new address overseas will wipe out your debts, think again. Your unpaid dues will stick around and may even follow you to a new location.

So, before you hop on that plane, let’s learn what happens to your debts when you cross international borders.

person signing papers

Key Takeaways

  • Moving to another country doesn’t erase your credit card debt. Creditors can still try to collect your unpaid debts.
  • Your U.S. credit score will be significantly damaged if your debt remains unpaid.
  • If you move to another country with unpaid credit cards, consequences can include legal action, tax accumulation, and even revocation of your passport.
  • Your ability to access financial services in a foreign country might be limited if you have a poor credit rating in your home country.
  • You can negotiate with creditors, consolidate your debts, or adopt payoff strategies to clear your debts before you move abroad.

Consequences of Leaving the Country with Unpaid Debt

When you fail to repay your debts, credit card issuers will carry out collection activities for up to 180 days after your deadline to get their money back. These usually include making collection calls and sending out letters to your address. After this period, the issuer will pass the defaulted debt to a collection agency.

Although the collection agency will have a tough time reaching you abroad, this doesn’t mean your debt is wiped out. It remains on your account back home and can have serious consequences. Let’s look at them below.

Ruined Credit Score

If you move to another country with unpaid debts, your credit score at home will take a big hit. A damaged credit score can make it much more difficult for you to borrow money in the future. Additionally, you will have trouble signing a lease, getting a cellphone plan, or even landing specific jobs.

One thing to note is that credit histories vary from one country to another. So, if you move abroad, you must start building a new credit there, typically by getting a permanent residence there. Obtaining a residency in a foreign country may require you to present a review of your U.S. credit report. If the immigration officer suspects that you’re moving to avoid paying your dues, there’s a high chance they might reject your application.

Accumulation of Taxes on Canceled Debt

If your creditors cancel or forgive your debt, it is still considered taxable income, and you will still be required to pay taxes to the IRS. Managing and negotiating with the IRS will be challenging if these taxes accrue while you’re abroad. You might face penalties and interest if you don’t settle the tax on the forgiven debt.

In some cases, the IRS may be able to garnish wages from foreign accounts or use international treaties to enforce tax collection. For instance, the U.S. has bilateral tax treaties with Canada, Germany, the United Kingdom, Australia, etc. Depending on the specific treaty, the tax collection agencies can exchange information with the IRS and allow for the collection of taxes.

After your credit card issuer and the debt collection agency can’t get their funds back, they have the right to sue you. This can involve lawsuits and court judgments. However, if you’re not physically in the U.S. and have not left assets behind, there’s nothing the court can do. But if you have assets in the U.S., the collector or the bank can get permission from the court to seize them as payment for what you owe them.

Potential Loss of Passport

In some extreme cases, the State Department can revoke your passport or deny you a new one. Some countries have laws that link debt to legal travel documents as a way to compel payment. If you’re overseas, the State Department may issue you a temporary passport to return to the U.S.

Is It Possible to Avoid Debt by Moving to Another Country?

Moving to another country doesn’t eliminate your credit card debt or legally absolve you from repaying it. Creditors can still attempt to collect the debt you owe, and with the growth of international banking and cooperation, escaping the debt by moving abroad is becoming increasingly impractical.

woman looking at credit card

Of course, choosing to chase you overseas also depends on the amount you owe. Pursuing you in another country is an immense hustle for debt collectors, as it involves a lot of resources and time. If the amount you owe is small, it may cost them more to reach you than to get that money back. But if you owe them a large amount, they will do anything to track you down and make you repay.

Strategies for Managing Debt Before Moving

Getting potentially involved in unpaid credit card debt will only cause complications, especially if you plan to return to the U.S. one day. So, dealing with your debt before moving abroad is always better. Here are some tips on how to get out of debt before relocating.

Negotiate with Creditors

If you’re struggling to make on-time payments, contact your creditors and ask for an alternative repayment plan. Explain your financial situation clearly and offer alternatives yourself. Some credit card issuers provide hardship programs for those with a good repayment history.

The creditor may offer you lower interest rates or waived fees, which can ease your financial problems and make it easier to manage your repayments even after you move abroad.

Consolidate Your Debts

Debt consolidation simplifies your financial obligations into a single payment, potentially lowering the total interest you owe. This can significantly accelerate your debt repayment process before you move abroad, ensuring you leave with a clear financial record.

The two standard methods of debt consolidation are personal loans and balance transfer credit cards:

  • Personal loans usually offer lower interest rates compared to credit cards. They can consolidate your debts under one roof and save you money on interest.
  • Balance transfer credit cards are available to people with a credit score of 670 or higher and transfer your existing balances to a credit card with a low or 0% introductory APR on balance transfers. These usually last 12 to 18 months, giving you an advantageous window to pay your debt without accumulating additional interest.

Adopt a Debt Payoff Strategy

A structured payment approach can help keep you on track with your deadlines and avoid defaulting. There are two common strategies to tackle your debts – the snowball method and the avalanche method. Here’s how they work:

  • Debt snowball involves paying off your debts from the smallest to the largest. Focusing on the smallest debt first and working your way up can build momentum and motivation as you clear each balance.
  • A debt avalanche is the opposite of a debt snowball, where the debts with the highest interest rates are tackled first. Paying off the most expensive debts first minimizes the total interest paid over time, which can be more cost-effective.

FAQ on Travelling while in Debt

If I Leave the Country, What Happens to My Debt?

Technically, nothing happens to your debt if you leave the country. Your creditors can still try to collect their money, and your debt will continue to accrue interest and fees according to your contract.

Can Creditors Chase Me Abroad?

It will be more difficult for creditors to chase you when you’re abroad. However, depending on the amount you owe and which country you’re in, some creditors may put more effort into chasing you down and making you pay what you owe them.

Can I Go Overseas If I Was Bankrupt?

There are no restrictions on traveling to another country if you are bankrupt unless specified by court orders or specific bankruptcy conditions in your country. However, traveling overseas during bankruptcy without court approval may lead to further legal complications.

What Are the Risks of Moving Abroad With Unpaid Credit Card Debt?

Risks include potential legal action, difficulty obtaining new credit, and damage to credit scores. Additionally, unresolved debt can lead to stress and financial instability, impacting one’s ability to settle in a new country.


Senior Content Creator, Financial Analyst
James Robinson is a Financial Analyst with 12+ years of experience. Specializing in investment strategies, risk management, and financial planning, James helps clients make informed decisions.

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