What can you do if you have debts in the USA, but you no longer live here?
Can you file bankruptcy and get rid of the debts?
Do you even need to?
Over the years I have had many clients who live outside the United States of America that need to file bankruptcy here. This is a tricky and, to the courts and many trustees, often a confusing proposition, but I assure you that if you meet the requirements, it is perfectly legal.
Do you Need to File your Bankruptcy in the USA if You’re Living in a Foreign Country?
The first question one must ask in this circumstance is whether it’s even necessary to file a bankruptcy case in the United States if you live abroad and plan to remain outside the USA.
The main goal to any bankruptcy is, of course, to eliminate the obligation to pay on debts. But if the creditors can’t get anything from you, what’s the difference?
Thus, whether you have assets that can be taken, is a key determining factor.
If you don’t have any assets (such as a house, or wages, or large bank account) that your creditors can seize or attach, then there’s probably no need to file bankruptcy.
Planning to return to America in the future to live? No problem. File bankruptcy then–after you return.
Filing bankruptcy in the USA protects your assets and income in the USA from your creditors by discharging the debts. It may or may not protect assets you have in foreign countries, depending on their laws.
In most cases, U.S. creditors are not going to come after your assets in a foreign country and, if they did, you can always avail yourselves of that country’s bankruptcy laws.
But, there are times when it is necessary, such as if you do still have assets in the USA or receive income from a US company, or plan to return in the near future. So: Can you file bankruptcy in the USA and, if so, WHERE in the USA can you file?
Are you Eligible to File Bankruptcy in the United States?
11 U.S.C. 109 (Section 109 of the United States Bankruptcy Code) allows any person to file bankruptcy in the USA if they reside, have a domicile, place of business OR property in the USA.
If you no longer live or have a residence in the United States, then it is mandatory that you have some property (assets) within the United States borders to qualify.
What constitutes sufficient “property”? That depends on the court, but for many, even a simple bank account will suffice.
Sometimes depositing funds into an attorney’s trust account can meet the requirement.
In other words, in most cases almost any asset here in the USA will make a person eligible to be a debtor in bankruptcy. (which chapter you’re eligible for is another matter altogether, and that can get very complicated using foreign currency and expenses).
Also, although it isn’t a requirement, for practical purposes you also must have a mailing address in the USA where you regularly receive mail.
Where in the United States Can you File Your Bankruptcy Case (VENUE)?
Once it is determined that you are eligible to file a case in the USA, the next question becomes WHERE in the USA you can file bankruptcy.
Federal venue laws (28 U.S.C. 1408) require that your case be filed in the district where you have resided, been domiciled, had your principal place of business in the USA or principal assets in the USA, for the greater part of the 180 day period prior to filing your bankruptcy case.
But what happens if you’ve lived outside the USA for more than 180 days? Then your case would need to be filed in the district where your principal assets in the USA were located for the greater part of the 180 days prior to filing your bankruptcy case.
In cases where a bank account is the only asset you have in the USA, your case would supposedly need to be filed in the jurisdiction where the bank account was located during that period.
Theoretically, it may be possible to move the bank account to a location of your choosing and file there after 91 days.
None of the above affects which state’s exemption laws will apply to your case (which can be tricky to determine if you’ve lived outside the USA for more than 2 years) but it does affect where you will have to appear for your mandatory meeting with the Trustee.
Physically Returning to the United States
If you file a bankruptcy case, you will be required to physically attend the meeting with the Trustee in your case.
Ultimately, the need to appear for the section 341(a) meeting and the costs associated therewith, may outweigh the benefits to filing the bankruptcy.
In some cases, depending on the reasons why, the US Trustee’s office or the court may excuse physical appearance at the meeting, but this usually requires a showing of medical necessity or active military obligations.
Additional treatment of this subject can be seen in my article on filing bankruptcy for debtors working/living outside the USA (pdf) published in the Central District Consumer Bankruptcy Attorneys’ Association newsletter.
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