5 Drawbacks of Moving Abroad to Escape Debt
If you’re drowning in debt and are unable to foresee yourself getting out of it then the idea might have popped into your head to move to a different country in order to run away from your debts. There are many people out there who head to Belize, Ecuador, Panama, etc. just to get away from their financial situation. However, relocating abroad isn’t the cure-all to getting out of debt, as financial problems don’t just dissipate. Here are some downfalls that may come your way if you attempt to get out of your debts by moving out of the country.
Cash is Necessary
Moving to a different country won’t be as simple as purchasing a plane ticket and packing up your belongings. On top of the expenses that you’ll have, like finding a living situation, you must also secure residency in the country if you want to live there for a substantial amount of time. Keep in mind that in order to establish residency in another country you’ll need cash, a steady income or both. The problem is that if you are drowning in debt to begin with, chances are you don’t just have the cash lying around.
You May Need to Stick With Cash
Are you one to pull out your credit card whenever money is getting tight? Well you probably won’t be able to do so overseas, and will have to learn how to be much better with budgeting. If you think that re-establishing or establishing your credit in the United States was hard then realize that it is nothing compared to the process you’ll have to go through in other countries. Whether it’s an auto loan, mortgage or credit card, lenders usually aren’t as quick or generous to give out credit like they are in the U.S.
Taxes Can Catch Up to You
Even if you don’t have creditors knocking down your door in order to get you to repay your debts, the IRS will want you to continue to file your tax returns and pay them what you owe. If you leave the U.S. with debts that have gone unpaid then eventually those balances will get written off as creditors will probably file a 1099-C form with the IRS, which reports any unpaid amount more than $600 as income. The IRS will then expect that you can pay taxes on this income. You can avoid paying this if you’re able to prove that you qualify for an exclusion or exception, however most people don’t.
Your Debts Won’t Just Disappear
Your debts aren’t just going to go away. Even if you move overseas and reside in a foreign country, your American debts will remain intact. In fact, your creditors might just gain an even better advantage due to the fact that they can file a lawsuit against you to receive a judgment with impunity while you’re abroad. If you don’t think you can get sued while you’re abroad, you’re sadly mistaken. Creditors are able to sue you in the last state that you resided in, and they will likely attempt to gain access of any U.S. assets you left behind.
Foreign Creditors Can Gain Access to Your Credit Score
While it isn’t too common, some foreign creditors located in the country you choose to run away to may order a copy of your United States credit report. Even if this isn’t too common place, if it does occur than your past credit mistakes may just ruin any financial future you could have in a foreign country.
Filing for bankruptcy, or even at least doing research into your various bankruptcy options is typically a much better option than running away to a foreign country. Bankruptcy will aid you in discharging all if not most of your debts, and will help you get a fresh financial slate whether or not you’re living abroad. Keep in mind that you can actually file for bankruptcy from any country, even while you’re residing abroad. If you aren’t able to pay your outstanding debts than filing for a Chapter 7 bankruptcy can be the best financial option for your situation and so you shouldn’t shy away from it.