What Happens To Unpaid Credit Card Debt If You Move Abroad? (2024)

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 can last up to 180 days, after which the bank can charge off the account and send the defaulted debt to a debt collection agency.

Being in another country will certainly make it harder for a debt collection agency to contact you about your debt, but it’s unlikely to fully deter them. 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 the first collection agency is unsuccessful, your credit card issuer may 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 could sell your defaulted debt to a debt buyer who would use any allowed tactics to get you to pay up. Debt buyers purchase defaulted accounts en masse at discounted prices. Bear in mind that when accounts get sold or transferred it can become quite complex and difficult to handle.

Your U.S. 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 different in every country, so you’ll be starting a new credit history when you move to a new country. The most important thing you’ll need to start building credit in a new country is a permanent residence to prove to the nation’s government—and your first move should be to open a bank account, which generally requires a permanent residence. This way you can begin to build credit and transfer your money from your previous home country to access it locally, rather than under the cloud of debt you left behind.

You Will Have To Pay Taxes on Any Canceled Debt

If your debt is canceled, forgiven or settled, the IRS can still make you pay for it—literally—regardless of where you’re living. After debt has been removed, the IRS categorizes it as income for tax purposes and expects you to file taxes on it, which can be a potentially massive bill. For example, if your credit card issuer writes off $20,000 of debt, the IRS will regard this as $20,000 of income that you are required to pay taxes on.

Your Bank or Collector May Sue You

After a period of trying to chase you down for payment, creditors are within their rights to sue you for unpaid debt. And lawsuits generally don’t go the way of the defendant if the defendant doesn’t show up to court. If you have departed the U.S. and have left nothing behind, there isn’t as much the court can do since you’re outside its jurisdiction, but be careful if you still have U.S.-based assets. A judgment without you around can result in the creditor getting permission to garnish your assets as payment for what you owe. This can include any property, U.S.-based income, savings or other accounts.

You Could Lose Your Passport

To get you to pay your seriously delinquent tax debts to the IRS, the State Department may revoke your current passport or deny you a new one. And if you’re overseas when your tax debts are certified with the State Department, it may issue you a limited passport to make sure you come back.

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 could 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 don’t disappear and you still have an obligation to repay them. However, if your move abroad is genuine, just make sure to be communicative with your credit card issuer and/or debt collectors.

Negotiation

Credit card issuers are sometimes willing to negotiate payment terms or may offer a hardship program to debtors with good payment records. Try contacting your creditor to explain your situation and establish a repayment schedule. Working with your credit card issuers can provide relief during hard times and could result in more affordable interest rates or dismissed fees.

Debt Consolidation

Debt consolidation merges multiple debts into a single account. Rather than making separate payments each month to numerous credit card issuers, consolidation can lower your interest rates and help pay off your debts quicker. There are two strategies to consolidate your credit card debt:

Personal Loans

Applying for a fixed-rate debt consolidation loan could be another strategy for making your debts more manageable. Personal loans often have lower interest rates than credit cards which could help you save a significant amount of money over the life of the loan.

Balance Transfer Credit Cards

Applying for a credit card that offers a low APR on balance transfers could be a smart option for those who have good credit. These cards often offer a 0% introductory period for 12 to 18 months, but some offer even longer periods. This can be crucial in paying down outstanding debt as it gives you a chance to tackle your debt directly without worrying about interest.

Debt Payoff Strategies

Credit card payoff strategies such as the “debt snowball” or “debt avalanche” can be useful for tackling your debts. With either plan, you’ll focus on paying extra toward one credit card account while making the minimum payments on the other others. With the debt snowball you’ll order your debts by amounts owed from smallest to largest while with the debt avalanche you would order them by APR from highest to lowest.