I Have $110K in Debt But I Live Outside the U.S. and Want to Know if I’m Safe?

Question:

Dear Michael,

I have ~$110k in unpaid credit card debts with various creditors. It’s been ~250 days since I made my last payment. My goal is to settle these debts.

I’ve been living and working abroad in a South American country for the past year, and expect to continue living abroad for the next 5+ years. The statute of limitations on debt collection in my US state of residence is 6 years.

While I’m abroad, how safe am I from lawsuits over these credit card debts? If I can’t be served I feel like it would be difficult or impossible to serve me. Thanks for your guidance on this!!

Alice

Answer:

Hi Alice,

Your situation is something I come across more and more.

The things I think about in similar situations are:

• Does your leaving the country toll the statute of limitations?
• Do your lenders care?
• If you show up in the US again, with credit pulls for an apartment, cell phone, etc., will that trigger debt buyers and creditors to seek you out?
• Will those negatives prevent you from setting yourself up to restart life in the US?
• Could you become a victim of “sewer service”?
• Do creditors pursue debts outside the US?

Talk to an experienced debt collection consumer law attorney about “tolling”, but my experience is that lenders are not an overly creative lot. They develop policies, procedures, and protocols to manage collection and recovery broadly. This means my expectation is that they will most likely calculate the last known state SOL, even if they know you left the country.

I talk with many people who thought they would be gone from the US longer, and who find they need to settle debts that are passed the SOL in the state they move to, in order to set up and progress with life. That is a concern for later, and if that happens to you, and you do need to settle a debt for less than what you owe, the deals are often better the older the debt.

Debt does not go away even when it passes the SOL to sue, and remains on your credit reports for 7 years from when you stopped paying. Even if your debts are passed any legitimate credit reporting timeline, debt collectors could have alerts set that is triggered by credit inquiry activity, and they may start reaching out to you in order to collect. I have a video up about zombie debt, and what you may want to do to deal with that if it happens.

Sewer service is a reference to a process server taking files and throwing them in a dumpster, yet signing off with courts that they indeed physically served someone. This issue can be more than that for people who have left the US. Your former address is what is on file, and a process server could go to that location and serve someone you do not know. They would notify the court of service, and a lawsuit may end in a default judgment against you, as the court would not know that you were not served.

There are also alternative service options in many states to be concerned with.

I tend to want to encourage people to call creditors and tell them what is going on. Informing them of your leaving the country makes it hard to justify sending your account to a collection law firm. If you do hear of a collection law firm collecting on your account, it is often a good idea to call and inform them of your no longer residing in the US. Those guys (collection attorneys) may care more about the SOL tolling, but here too, they are not an overly creative lot and are not likely to sit on your account, waiting for some jurisdiction issue to resolve itself. They may just kick your account back to your original creditor, or a debt buyer.

For the last couple of years, I have had more people get concerned about US-based debt collection efforts following them out of the country. I just do not see that. Not for more than 20 years of paying attention to it.

Large banks certainly have a presence in many countries, and the two largest debt buyers in the US, Portfolio Recovery Associates, and Midland Credit Management, are huge global companies. The resources to connect collection efforts are there, so why do we not see it? I am sure there are several compelling reasons, but the fact you have a contract for credit based on US law, perhaps trying to force payments in a Thailand court, when the recovery rate on unpaid debt inside US borders is bad enough, well…. The prospect of spending perfectly good money, to chase down debts overseas, when the prospects for recovering anything other than a bill for your trouble, means even sophisticated creditors and debt buyers are typically not a threat outside the US.

My two biggest concerns for people leaving the country with unpaid debts in the US, are sewer service, which you can try to manage by openly communicating with your creditors, and debt buyers that may not get the note that you no longer live in the US, who may then end up attempting to serve you at your last known address, or via alternative service methods. I do not have an easy answer for staying on top of debt sales that will put you at risk. Most debts are not sold, so that is somewhat helpful.

If you post the names of your creditors in the comments below I can reply with whether or not they currently sell accounts. I can also help you evaluate the settlement outcomes you may be looking to accomplish along the way.

Michael