Does bankruptcy protect me against debts from other countries?

21 Jun Does bankruptcy protect me against debts from other countries?

Clients frequently face debts from countries other than the United States.  If you file a bankruptcy case in the United States, what is the effect on your debts from overseas?

We tell clients not to worry too much about this.  First of all, it takes some effort for a foreign creditor to make its judgment enforceable in the United States.  Some states might allow for “domestication” of judgments easily and others might not.

Nevertheless, a discharge in bankruptcy will wipe out all judgments against you whether they arose here in the United States or someplace else.  This means that judgment creditor may not collect this judgment against you in the United States after your discharge.  If it does, you could sue them for the violation of the discharge injunction.  You may have other remedies too.

This does not mean that you are “home free.”  If you were to move back to the country where the judgment arose, let’s say Scotland for example, your United States bankruptcy discharge would not affect the validity of the judgment in Scotland.  You would have to seek bankruptcy in the foreign country under the foreign country’s laws in order to protect yourself there.  So, more realistically, if you have claims against you in neighboring countries like Mexico or Canada, you’d have to address your rights under Mexican or Canadian bankruptcy law if you planned to move back there to protect yourself against claims arising in your home country.

This leads us to another important point.  You need not be a citizen of the United States in order to file a bankruptcy case in the United States.  Tune in tomorrow for a new post on citizenship and bankruptcy.

Lakelaw helps people from all over the world file bankruptcy cases in Illinois and Wisconsin.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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