Sometimes, certain situations require that you relocate abroad. In cases such as these, it is possible to have some unfinished business left behind. One of these is easily debt, especially in this day and age where we all use credit cards.
Apart from credit card debts, debts such as those owed to financial institutions also fall under this category. Moving abroad and leaving your debt behind doesn’t mean that it would just up and disappear just like that.
Depending on how much you owe and who you owe this debt to, there are a variety of options for them to explore in order to get their money back. So, if you’re wondering what would happen to your debt, the answer is simple.
Nothing would happen, you still have an obligation to pay up. And if yours is the type that accrues interest, well, you know that you would be paying back with some extra. This is because leaving the country doesn’t render your contract with your creditor void.
If your creditors are unable to get the money because you have relocated, they can place a marker on your account or get a judgment. This would make it a great deal harder to open new bank accounts locally or preserve the credit lines that you already got on your existing accounts.
Apart from this, here are some other direct consequences:
Difficulty in Your Transition Abroad
If you fail to pay your debt, your case would be reported to the Equifax and TransUnion bureaus, resulting in a direct effect on your credit.
While this impact may not be greatly felt outside of a country like Canada, having a low credit score can result in certain limitations being placed on your credit options in the new country.
Such limitations would only be taken away after you have proven that you’ve got a source of steady income.
In addition, if you end up not being able to make use of your local cards in the country you moved to, you may experience difficulty making a full transition and then settling down.
If your creditors already file a lawsuit and served you papers before you left the country, then the lawsuit would remain even in your absence.
The lawsuit would possibly continue and if your creditors win the lawsuit, they can be given the power to take over any asset(s) that you left behind.
However, if you left before the lawsuit was filed, then your creditors would have to bring the lawsuit into your new country of residence.
This implies that they would have to follow all the rules and procedures of your new country of residence as well as hire a counsel in that area.
The process is generally stressful for creditors, especially if they cannot track you down.
Now, assuming that your creditors do not even bother to track you down, and you are looking to settle down in the new country. There are some other pitfalls that you may face as well.
You Need to Have a Significant Amount of Cash at Hand
Moving to a foreign country basically implies uprooting your entire life and going to replant it elsewhere. So, it goes beyond just purchasing a plane ticket packing a bag.
Why? Because there are certain expenses that you would definitely incur. First is a place to stay. If you intend to stay for long in the country, you would need housing in order to secure residency.
The two main methods of setting roots or getting residency in a foreign country typically require cash, income or even both.
The first method involves proving that you’ve got a steady and reliable monthly income source. This implies that you need to prove that you earn enough monthly income that meets the standard of minimum income for that country.
The other method is via making a significant investment in the country. This is literally buying your way with a significant investment in real estate or business to get residency.
For instance, in a country such as Colombia, a small investment of $30,000 is enough to get residency. However, here lies the obvious problem. If you’re neck-deep in debt, you may not have such cash just simply lying around.
Therefore, this might not work for you either.
You May Need to Conduct a Cash Only Policy
When cash starts to get tight, it’s almost second nature to fall back to your credit cards. However, if you’re going to survive abroad without credit cards, you’re going to need to become a better manager of your finances.
The process of getting a credit card in other countries outside of the U.S can be a whole lot tougher than the process is in the U.S. Lenders are usually a lot warier about extending credit whether it is an auto loan or mortgage or even a credit card.
Also, the limits are progressively lower and building a credit card history in other countries can be a very tasking process.
How to Get Out of Local Debt While Abroad
Learning how to get out of debt is a lesson that you need to learn if you are owing. This is simply because the debt isn’t going anywhere. So, one way or the other, you would still have to clear it all up.
One practical way of paying your debt back when abroad involves certain strategic decisions. First off, choose a country with a relatively low cost of living and become an expat there.
Work, and then channel your earnings into paying your debt. This is especially suitable if you’ve got a job or a business that you can run from any part of the world. Therefore, you can live on a modest income and pay your debt back in no time.