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Debt and International Boundaries


Flyingifr
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Every now and then I see on the various Boards questions concerning collection of debt across International boundaries. The attached US State Department information sheet is priceless in answering those questions. Since this is a US Government document there are no copyright issues.

The link: http://travel.state.gov/law/judicial/judicial_691.html

The text is in an accompanying post because the post exceeds the Board's character-per-post capacity. The Notes and supplemental information are in a third for the same reason.

Edited by Flyingifr
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The text (footnotes are in the next post)

Enforcement of Judgments

DISCLAIMER: THE INFORMATION IN THIS CIRCULAR IS PROVIDED FOR GENERAL INFORMATION ONLY. THE DEPARTMENT OF STATE MAKES NO WARRANTY REGARDING THE ACCURACY OF THIS INFORMATION. WHILE SOME OF THE INFORMATION IS ABOUT LEGAL ISSUES, IT IS NOT LEGAL ADVICE. QUESTIONS INVOLVING INTERPRETATION OF SPECIFIC FOREIGN LAWS SHOULD BE ADDRESSED TO FOREIGN ATTORNEYS.

GENERAL

There is no bilateral treaty or multilateral international convention in force between the United States and any other country on reciprocal recognition and enforcement of judgments. Although there are many reasons for the absence of such agreements, a principal stumbling block appears to be the perception of many foreign states that U.S. money judgments are excessive according to their notions of liability. Moreover, foreign countries have objected to the extraterritorial jurisdiction asserted by courts in the United States. In consequence, absent a treaty, whether the courts of a foreign country would enforce a judgment issued by a court in the United States depends upon the internal laws of the foreign country and international comity. In many foreign countries, as in most jurisdictions in the United States, the recognition and enforcement of foreign judgments is governed by local domestic law and the principles of comity, reciprocity and res judicata (that is, that the issues in question have been decided already.) i

The general principle of international law applicable in such cases is that a foreign state claims and exercises the right to examine judgments for four causes: (1) to determine if the court had jurisdiction; (2) to determine whether the defendant was properly served; (3) to determine if the proceedings were vitiated by fraud; and (4) to establish that the judgment is not contrary to the public policy of the foreign country. While procedures and documentary requirements vary widely from country to country, judgments which do not involve multiple damages or punitive damages generally may be enforced, in whole or in part, upon recognition as authoritative and final, subject to the particulars cited above, unless internal law mandates a treaty obligation. ii iii iv

If eventual enforcement of a United States judgment abroad is envisioned, you may wish to consult foreign legal counsel before you begin filing the complaint, serving process, discovery, trial, etc. v This may help ensure that the foreign requirements for enforcement are not inadvertently violated in the U.S. action. In certain foreign legal systems, a foreign judgment will not be enforced unless it satisfies not only international standards as to jurisdiction, but also internal requirements as to notice, and other requirements. vi Once a judgment has been issued by a court in the United States, formal legal proceedings usually must be initiated in the foreign country by your foreign legal counsel or American counsel licensed to practice in the foreign country. vii viii ix

PERSONAL JURISDICTION: It is fundamental that a court must have personal jurisdiction over a defendant before it can enter a valid judgment imposing a personal obligation on the defendant. Kulko v. Superior Court , 436 U.S. 84 (1978). In Pennoyer v. Neff , 95 U.S. 714 (1878) the Supreme Court set down the basic rule that a personal judgment against a nonresident defendant who was not served within the state, and who did not appear or otherwise assent to the jurisdiction of the court, is invalid. Over the years, however, the Supreme Court has substantially qualified Pennoyer to the extent that, under certain circumstances, a state court may properly acquire personal jurisdiction over a nonresident even though the defendant is not personally served within the forum state, provided the defendant has certain "minimum contacts" with the forum state "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310 (1945). See also, e.g., Hanson v. Denckla , 357 U.S. 235 (1958); Shaffer v. Heitner, 433 U.S. 186 (1977); and World-Wide Volks-Wagen Corp. v. Woodson, 444 U.S. 286 (1980). As noted above, foreign countries may find that the U.S. interpretation of this issue differs from local foreign law, rendering the U.S. judgment unenforceable abroad. For this reason, you may wish to consult local counsel in the foreign country very early in the U.S. proceeding, long before any judgment is rendered.

RETAINING A FOREIGN ATTORNEY: You may wish to consult your local counsel before proceeding with the expensive task of translating and authenticating documents for a foreign enforcement proceeding. The Department of State, Office of American Citizens Services can provide lists of attorneys in foreign countries who have expressed a willingness to represent U.S. citizens. See also our flyer Retaining a Foreign Attorney available on our home page on the Internet.

See also: Digest of U.S. Practice in International Law, Office of the Legal Adviser, Department of State, 1977, 993-994; Digest of U.S. Practice in International Law, Office of the Legal Adviser, Department of State, 1976 , 316-318; Digest of U.S. Practice in International Law, Office of the Legal Adviser, Department of State, 1975, 340-342; Whiteman, Digest of International Law, Department of State, Office of the Legal Adviser, Chapter XIV, Section 14 Volume 6, pages 225-253 (1968).

SERVICE OF PROCESS: For information about service of process abroad, obtain a copy of our flyers Hague Service Convention , U.S. Department of State Circular on Operations of the Inter-American Convention - In Progress, Service of Process Abroad and country-specific flyers through our home page on the Internet.

ENFORCEMENT OF A FOREIGN JUDGMENT IN THE U.S.: Enforcement of judgments issued by foreign courts in the United States is governed by the laws of the states. Enforcement cannot be accomplished by means of a letter rogatory in the U.S. under 28 U.S.C. Sec. 1782. See the Secretary of State''s circular diplomatic note of 2/3/76 to the Chiefs of Mission in Washington, D.C., Digest of United States Practice in International Law, 1976, U.S. Department of State, Office of the Legal Adviser, 306, 311 at 309 (1977). Under U.S. law, an individual seeking to enforce a foreign judgment, decree or order in this country must file suit before a competent court. The court will determine whether to give effect to the foreign judgment. As with most legal proceedings, it is necessary to retain legal counsel to conduct the suit. x xi xii xiii See also the Uniform Enforcement of Foreign Judgments Act (13 U.L.A. 261 (1986) and the Uniform Foreign Money-Judgments Recognition Act, 13 U.L.A. 149 (1986). But see , Ackermann v. Levine, 788 F. 2d 830 (2d Cir. 1986); Matter of Colorado Corp., 531 F. 2d 463 (1976); Clarkson Co., Ltd. v. Shaheen, 544 F.2d 624 (1976).

ARBITRATION: There are a number of international agreements in force to which the U.S. is a party on the subject of enforcement of arbitral awards. Inquirers may also wish to consult one of the many treatices on the subject or contact the American Arbitration Association, 140 West 51st St., New York, N.Y. 10020-1203; 212-484-4000, 212-484-4110; fax: 212-765-4874 regarding the operation of these agreements and other issues pertaining to arbitration. xiv xv xvi xvii See , Convention on the Recognition and Enforcement of Foreign Arbitral Awards , 21 UST 2517; TIAS 6997; 330 UNTS 3; Inter-American Convention on International Commercial Arbitration , 14 I.L.M. 336 (1975). See also , 9 U.S.C. 201-208 (Federal Arbitration Act); Digest of United States Practice in International Law, U.S. Department of State, Office of the Legal Adviser, 1974, 761-763; Digest of United States Practice in International Law, U.S. Department of State, Office of the Legal Adviser, 1975, 895-897; Digest of United States Practice in International Law, U.S. Department of State, Office of the Legal Adviser, 1976, 791-792; Digest of United States Practice in International Law, U.S. Department of State, Office of the Legal Adviser, 1979, 1882-1885; Cumulative Digest of United States Practice in International Law, 1981-1988, Vol III, 3709-3718 (1995).

Edited by Flyingifr
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3 of 3:

ADDITIONAL INFORMATION: Many of our judicial assistance flyers are also available on the Internet via the Department of State, Bureau of Consular Affairs home page under Judicial Assistance . See also, the Department of State, Office of the Legal Adviser for Private International Law home page for information regarding private international law unification. See also the home pages for many of our embassies . But see, U.S. Department of Commerce, Office of Chief Counsel for International Commerce home page .

Treaty Databases on the Internet:

United States Department of State, Office of the Legal Adviser, Treaty Affairs, List of Treaties and Other International Agreements of the United States In Force:

United Nations (UN): Databases/Treaties

Council of Europe (COE): under Texts/Treaties

Organization of American States (OAS): under Documents/Treaties and Conventions.

SELECTED REFERENCES:

Lutz, Bibliography: Enforcement of Foreign Judgments, Part I: A Selected Bibliography of U.S. Enforcement of Judgments Rendered Abroad, 27 Int''l Law. 471, 494 (1993).

Lutz, Bibliography: Enforcement of Foreign Judgments, Part II: A Selected Bibliography of Enforcement of U.S. Judgments in Foreign Countries, 27 Int''l Law. 1029, 1060 (1993).

Questions: Additional questions may be addressed to the appropriate geographic division of the Office of American Citizens Services at 202-647-5225 or 202-647-5226.

FOOTNOTES

i Hilton v. Guyot, 159 U.S. 113 (1965); 47 Am Jur 2d, Judgments, Section 1214 et seq

ii Bungert, Enforcing Excessive and Punitive Damages Awards in Germany, 27 Int''l Law. 1075, 1090 (1993).

iii Nettesheim & Stahl, Recent Development, Bundesgerichtshof Rejects Enforcement of United States Punitive Damages Award, 28 Tex. Int''l L.J. 415 (1993)..

iv Waller, Under Seige: United States Judgments in Foreign Courts, 28 Tex. Int''l L.J. 427, 434 (1993).

v Waller, at 429.

vi Casad, Civil Judgment Recognition and the Integration of Multi-State Associations: A Comparative Study, 4 Hastings Int''l & Comp. L.R. 13, note 18 at 14 (1980).

vii Nanda & Pansius, Litigation of International Disputes in U.S. Courts, Sec. 12 (1992).

viii Weems, ed., Enforcement of Money Judgments Abroad, New York, Matthew Bender (1992).

ix Casad, Enforcement of Foreign Judgments, Kluwer Law Int''l (1995).

x Wright, Miller & Cooper, Federal Practice and Procedure, Sec. 4473 at 741 (1982), at 570 (1996 supp.).

xi Born & Westin, International Civil Litigation in United States Courts, 564-604 (1989).

xii Restatement (Third) Foreign Relations Law of the United States, St. Paul, Minnesota, American Law Institute, Sec. 481-486, 482(1)(B) (1987).

xiii Restatement (Second) of Conflict of Laws, St. Paul, Minnesota, American Law Institute, Sec. 98 and 104 (1971).

xiv Born, International Commercial Arbitration in the United States (1994).

xv Born & Westin, International Civil Litigation in United States Courts, 605, 646 (1989).

xvi Westin, Enforcing Foreign Commercial Judgments and Arbitral Awards in the United States, West Germany and England, 19 Law. & Pol''y Int''l Bus. 325, 338 (1987).

xvii McLaughlin & Genevro, Enforcement of Arbitral Awards Under the New York Convention -- Practice in U.S. Courts, 3 Int''l Tax & Bux. Law. 249 (1986)

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The other thing (and perhaps the most straightforward point) is that you have to sue in the county and/state of the Defendant's residence.

Or where the agreement was signed.

Both of which become problematical when the contract was signed in a State and County that the debtor no longer resides in, so the Process Server cannot serve the debtor within THAT jurisdiction, and the debtor lives in a Country that will not permit service of a summons issued by the courts of a different country.

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The problem goes even further than that because if we assumed that they got the judgment, the creditor still cannot collect on it unless the debtor returns to the USA with some assets that can be seized and converted to cash. If the debtor is smart, they will not pay any US taxes because odds are high that they will not owe any US taxes and hence, will not get a refund. They will have most, if not all, of their high value assets in the foreign country, and have no attachable US income.

The fees for exporting a judgment to a foreign country are especially high (related to what most debtors owe). The creditor may also find that they have to re-argue the case in the foreign court where quite possibly, the debtor knows the rules better than they do. Plus, from what the article says, foreign courts are not too fond of the US civil legal system and hence , may offer a different ruling. Then what, to the world court at The Hauge?

HOWEVER, one of the facts going for the creditor is once the debtor left the country, the SOL clock has stopped so they could bring a case years later should the debtor ever return to the USA.

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There are many factors that would allow a bank to get a judgment, even if the person was not served by hand. If the debtor did not notify the bank of the move out of the USA, the bank can simply do a substitute service such as printing notice in the local newspaper and then continue on. That has occurred in the past in situations where a person has either hid from the service processor or from the creditor.

But again, even if the creditor does get the judgment, as we all know, that is a long way from them getting their money. Even if a financial statement was ignored, good cause would be not receiving the form so they cannot use the threat of jail.

Personally, I think most creditors give up when the issue becomes international. I know many who call here looking for someone I know is in Honduras are very cordial but sound defeated when I tell them that.

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Whocares - while it is true a creditor can often use Substituted Service or Service by Publication when a defendant cannot be served personally for some reason, the issue of the Court's jurisdiction does not go away. In my former State of Arizona the Courts lost all jurisdiction over me sixty days after I left.

So... serve if you will by any means - if the Court has no jurisdiction the service is meaningless and void and, according to the US State Department, the foreign Court will look into that.

Here's an example - let's say one of my USA creditors gets a judgment against me in Arizona and tries to domesticate it here in China. The Chinese courts will look at the date of service and place of service for the USA Judgment, and then my passport to see when I entered China and will clearly see that the process server could not have served me in Arizona by any means if I was in China on the date of service. The China People's Court will then tell the USA creditor to go peddle his papers somewhere else and leave them alone to take care of important matters.

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If the debtor is smart, they will not pay any US taxes because odds are high that they will not owe any US taxes and hence, will not get a refund....just had a question as to why this is relevant? Unless I missed something about tax refunds in the body of Flying's post this seems to me to imply that using the tactic above would be protecting the debtor's tax refund from the creditors?

This is the reason I'm curious if this is what you meant as it is my understanding that a "typical" consumer creditor (i.e. not a delinquent tax creditor) had no access to ones tax refund. I had read I had thought many times that there was no way for a non govt/student loan/tax creditor to in any way intercept your tax refund prior to it getting to you.

Any input as to whether I had the wrong idea?

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Flying: That is all fine and dandy that the Chinese Legal System would not allow the judgment but as far as the AZ courts are concerned, it is still a valid judgment and hence could cause issues on the return to AZ. In fact, I would doubt that the creditor would really want to try to obtain a foreign judgment in China simply because of the cost involved as well as the fact that the legal system is so different. They would simply wait until they could hopefully catch you on a return trip.

As for tax refunds, the US Government sends its checks out in US Funds. Very hard to cash in a foreign country. Hence, you would need a US bank account to get those funds and the creditor can simply scarf up the account before you have a chance to. In any case, as a US abroad person, you really do not need to pay into the US tax system unless you have a 6 figure US Dollar income while abroad. the first $70k - $80k is not taxable, then you get a $ for $ credit for any tax you paid in the foreign country (which you have to do to receive the US tax breaks). Plus, if you have to pay taxes, if the taxes are under $1000, you just pay at the end of the year, otherwise you do quarterly installment. It is real easy to avoid a refund.

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Guest usctrojanalum
Whocares - while it is true a creditor can often use Substituted Service or Service by Publication when a defendant cannot be served personally for some reason, the issue of the Court's jurisdiction does not go away. In my former State of Arizona the Courts lost all jurisdiction over me sixty days after I left.

Could you please post this law/rule/regulation? Seems incredulous that if a cause of action arises in Arizona, a potential plaintiff is now unduly prejudiced because someone decided to flee from their obligations.

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  • 2 weeks later...
12-501. Effect of absence from state

When a person against whom there is a cause of action is without the state at the time the cause of action accrues or at any time during which the action might have been maintained, such action may be brought against the person after his return to the state. The time of such person's absence shall not be counted or taken as a part of the time limited by the provisions of this chapter.

Read also: http://articles.directorym.com/Personal_Jurisdiction_Arizona-r935138-Arizona.html

Basically, once I left Arizona, the Arizona courts lost jurisdiction over me. My AZ attorney advises me that an AZ Court case extended that to 60 days after my departure.

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Flying: That is all fine and dandy that the Chinese Legal System would not allow the judgment but as far as the AZ courts are concerned, it is still a valid judgment and hence could cause issues on the return to AZ. In fact, I would doubt that the creditor would really want to try to obtain a foreign judgment in China simply because of the cost involved as well as the fact that the legal system is so different. They would simply wait until they could hopefully catch you on a return trip.

As for tax refunds, the US Government sends its checks out in US Funds. Very hard to cash in a foreign country. Hence, you would need a US bank account to get those funds and the creditor can simply scarf up the account before you have a chance to. In any case, as a US abroad person, you really do not need to pay into the US tax system unless you have a 6 figure US Dollar income while abroad. the first $70k - $80k is not taxable, then you get a $ for $ credit for any tax you paid in the foreign country (which you have to do to receive the US tax breaks). Plus, if you have to pay taxes, if the taxes are under $1000, you just pay at the end of the year, otherwise you do quarterly installment. It is real easy to avoid a refund.

You bring up two different points - one is the ability to obtain a Judgment and the other is the ability to enforce it. Believe it or not, the two are not interdependent.

The ability to obtain a Judgment on an foreign debtor is, as the US State Department advises, difficult and expensive. That said, the next statement - that the creditor will just wait because the SOL is tolled assumes debtor will return to the USA in the first place and that the creditor will remember the debt when the debtor does return. While creditors computers may have long memories, they do not have alarms that go off the second you pass through US customs. Once the debt has gone a couple of years without either payment or Judgment it is my bet the creditor will cease even looking for the debtor except in the most cursory way. JDB's are just as ineffective for the same reasons - the trail of the true debtor is long cold. Right or wrong, moral or immoral, these are the facts.

Since the creditor cannot obtain a US Judgment against a debtor who is not in the US, even if the debtor has a US bank account (which I do not), the creditor cannot attach it.

In the event the creditor obtains a Judgment before the debtor leaves the US, a bank account can be attached. The problem for the creditor is finding the bank account. Keep in mind, Federal Tax refunds (not State) can be direct deposited into foreign bank accounts. A check on a US bank sent to me in China can be deposited into my China bank account, converted to RMB and collected through the International payments Clearinghouse. I have been doing banking in Canada that way for decades.

You bring up correct information about USA tax laws and tax planning. As an Enrolled Agent I am fully aware of them. The Foreign Earned Income Exclusion applies individually to each spouse, so if husband and wife are both working abroad then the exclusion amount is doubled (but excess income above the exclusion from one spouse cannot be used to offset income of the other).

Obtaining a Judgment against a debtor who has left the country, as the State Department says, is at best difficult, and at worst expensive and impossible.

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ok,

so living abroad and there are a couple claims on me.

credit card.

i will be returning to usa on occassion to visit family. but no plan to live in usa for many years now.

i think i will file bankruptcy as i have no need of usa credit for 7 plus years.

am i ok with this thinking to file bankruptcy to end the issue and start over again if ever needing to return to usa

also, can they...cc companies, get to my foreign bank account as i forwarded money over here

also, is there a problem returning to the usa on the occassional visit

how does the bankruptcy process go if out of country

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ok,

so living abroad and there are a couple claims on me.

credit card.

i will be returning to usa on occassion to visit family. but no plan to live in usa for many years now.

i think i will file bankruptcy as i have no need of usa credit for 7 plus years.

am i ok with this thinking to file bankruptcy to end the issue and start over again if ever needing to return to usa

also, can they...cc companies, get to my foreign bank account as i forwarded money over here

also, is there a problem returning to the usa on the occassional visit

how does the bankruptcy process go if out of country

You can't file BK in the USA until you have lived there (not just visited, but actually lived there) for at least 60 days. Asa visitor you will be in and out of the USA before any creditor even knows you were there.

IF the Cc companies have a judgment and they can find your USA funds in a USA bank they can attach those funds.

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  • 1 month later...
You can't file BK in the USA until you have lived there (not just visited, but actually lived there) for at least 60 days. Asa visitor you will be in and out of the USA before any creditor even knows you were there.

IF the Cc companies have a judgment and they can find your USA funds in a USA bank they can attach those funds.

I also want to file bankruptcy to clear up my records so that one day if I return to the US it will be possible to start over and not have this over my head.

The 7 or so years is ok as no plan now to return.

How does one apply for bankruptcy while out of the country?

Also, what about visits to the US? I have to use US passport to travel in/out of country...any worry there? I was not yet served from what I know before I left, so I imagine it is now in process and judgement happened in my absence.

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I also want to file bankruptcy to clear up my records so that one day if I return to the US it will be possible to start over and not have this over my head.

The 7 or so years is ok as no plan now to return.

How does one apply for bankruptcy while out of the country?

Also, what about visits to the US? I have to use US passport to travel in/out of country...any worry there? I was not yet served from what I know before I left, so I imagine it is now in process and judgement happened in my absence.

You cannot file for protection under USA bankruptcy laws if you are not in a place where the US Courts have jurisdiction, it's that simple.

As far as your visit is concerned, you will almost certainly be in and out of the country before any creditor knows you were there and simply visiting a place does not give that place jurisdiction over you except in very limited circumstances, like being involved in an auto accident there or committing a crime there.

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You cannot file for protection under USA bankruptcy laws if you are not in a place where the US Courts have jurisdiction, it's that simple.

As far as your visit is concerned, you will almost certainly be in and out of the country before any creditor knows you were there and simply visiting a place does not give that place jurisdiction over you except in very limited circumstances, like being involved in an auto accident there or committing a crime there.

so, if I have an address in usa is that sufficient or do I need to make multiple appearances or worse have to supply proof of residency? I am in and out often enough to make it work for meeting a lawyer or judge or whatever...any suggested links or contacts in this regard. I need this finalized.

thanks.

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so, if I have an address in usa is that sufficient or do I need to make multiple appearances or worse have to supply proof of residency? I am in and out often enough to make it work for meeting a lawyer or judge or whatever...any suggested links or contacts in this regard. I need this finalized.

thanks.

Bankruptcy law requires actual residency.

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  • 2 months later...

I have searched this forum and decided this is the right place for me to read up on my problem. I have also read all the posts in this thread and feel I have been enlightened somewhat. What I want to question now is the 'residency requirement' for filing bankruptcy. On a number of websites I have read that if I currently have a bank account in the US, that constitutes property and am able to file bankruptcy. What I would like to clarify now is the issue of entering the US when traveling from Europe. Will the INS have any information on me (a legal resident of Florida) or my husband (a foreign national from Europe) regarding our credit status? I certainly don't want any alarms going off when we go through customs, nor do I want to have that fear upon arriving. BTW: We are not in arrears with any debts, but are considering some kind of bankruptcy since it has become too difficult to stay above water here (in Europe) and continue to make CC payments.

Grateful for your responses...

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I have searched this forum and decided this is the right place for me to read up on my problem. I have also read all the posts in this thread and feel I have been enlightened somewhat. What I want to question now is the 'residency requirement' for filing bankruptcy. On a number of websites I have read that if I currently have a bank account in the US, that constitutes property and am able to file bankruptcy. What I would like to clarify now is the issue of entering the US when traveling from Europe. Will the INS have any information on me (a legal resident of Florida) or my husband (a foreign national from Europe) regarding our credit status? I certainly don't want any alarms going off when we go through customs, nor do I want to have that fear upon arriving. BTW: We are not in arrears with any debts, but are considering some kind of bankruptcy since it has become too difficult to stay above water here (in Europe) and continue to make CC payments.

Grateful for your responses...

INS doesn't care about your debts. As long as you are not in violation of any US law you will not have a problem going through Customs or Immigration.

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