Clear up debts before moving abroad
By Erica Sandberg
September 12, 2014
There is over $20,000 on my Citibank credit card and $13,000 on my Discover card. I have not paid them in more than three months because I do not have a good job. I am leaving to go back to the Philippines and am not coming back here for one year at the earliest. Please help me. I do not know what to do. God bless you, Erica, for all the saving you do. –Divina
Your credit report is already feeling the impact of your actions. Every skipped payment cycle has been recorded, and with each subsequent late payment, the damage deepened. Before falling behind, though, you may have already hurt your credit by overcharging and maintaining such high balances. You don't mention what the credit limits are for these cards, but if you're at or close to the maximum, your credit rating has tanked. (The most common credit rating is FICO, which ranges from 300-850. It's critical because lenders use the figure to assess your creditworthiness. One critical factor FICO looks at is the credit utilization ratio, which measures how much you owe to how much you have on your credit card limits.)
If you don't get back on track with payments and soon, I predict that both Citi and Discover will take legal action against you. The fact is, $33,000 is a very large sum to abandon. After about 180 days of nonpayment, they'll be forced to decide what to do with the delinquent accounts. They will either sell them to a collection agency or sue you for repayment. But even if a collector buys the debt, it too can take legal action against you.
You can be sued whether you're in America or far away. It's better to be here so you can at least attend the hearing, but if you're not, they can still file with the court and attempt to serve you with papers showing the date to appear in court. The case will be heard even if you're not present.
Presuming the creditor makes a sound case against you and the judge rules in its favor (highly likely), you'll lose by default. After that you'll owe a monitory judgment, which will be on your credit report for seven years. The judgment creditor can collect what's due for the permitted length of time in your state. During these years, they may be able to attach non-exempt wages and claim certain assets until the debt is cleared.
Therefore, when you come back, these repercussions could be waiting for you.
What happens if you don't return to U.S. soil until after the judgment is no longer enforceable? Not much. By that point the judgment will be removed from your reports. And if the collector doesn't choose to sue within the statute of limitations timeframe, you'd be safe from the legal troubles. The negative data will remain on your reports for 10 years.
Mind that I'm assuming that no one else is listed as an account owner. If there is, that person will be held liable for the debts and he or she can face all the actions I described.
Now, here's what you can do.:
- Pay your bills. You borrowed the money, so if you have the funds, do the right thing and make good on the obligations. If friends and family members used the cards or benefited from them, ask for donations. Sell assets and use the proceeds to delete the balance.
- Request assistance from the creditors. Tell them you're having trouble and ask what they can do to help. Smaller payments? A settlement? Even if they demand that you pay for everything you owe, at least you'll know you tried.
- Go to a credit counseling agency. The Federal Trade Commission provides information on choosing a credit counselor, including links to a list of credit counseling agencies, as well as how to make sure the one you choose is legitimate. A nonprofit organization can assist you with budget development and possibly a repayment plan with manageable payments. If you do use their program, you can pay through them no matter where you are in the world.
- Consider bankruptcy. I'd rather you end the matter completely than just flee the country. If you have no way of repaying and no property to lose, a Chapter 7 bankruptcy may make sense. If you can make payments, but not the amount the creditor expects, a Chapter 13 bankruptcy may work.
I hope you can get this situation under control, and that you never end up in this position again.
Got a question for Erica? Send her an email.