Can your passport be confiscated for unpaid debt?
March 18, 2009 4:41 AM   Subscribe

I think I remember reading a while ago (not sure where I read this or if it was a reliable source) that a US citizen settled out of the US can be detained or have their passport confiscated for large unpaid debts if they come back into the US, even for a short visit.

I was discussing this with a fellow ex-pat here in the UK the other day, who is considering just not paying her student loans for a while since she was made redundant late last year and she and her husband are really struggling - so if she defaults on her loan and comes back to the US to see her family, can she be kept in the country against her will? If so, for how long? Until the entire debt is paid?
posted by Wroksie to Law & Government (7 answers total) 3 users marked this as a favorite
Best answer: This doesn't really answer your question, but it may help: a student loan is not considered to be in default for 270 days. First, though, she can request a deferment (which is what she should do now - they will grant it on the basis of unemployment). At the end of her deferment period, she can make a single payment, and then make no other for 269 days - thus buying more time to recover from her financial issues - and still not be in default. This can buy her a lot of time and is sincerely what I wish I had done fifteen years ago.
posted by DarlingBri at 5:03 AM on March 18, 2009

Best answer: Anecdotal, but as a long term ex-pat (little over twelve years) I've never heard anything about this. And I do know some folks that take - ahemm - "extreme liberties" in their bill paying habits.

Lets take a critical look at the argument. In terms of private debts, would a judge issue a warrant for your arrest and detention if you were living in The United States? The nation has most definitely moved right since I've left, but I don't think debtors prison has made a come back.

However if a lawsuit were filed that resulted in a judgement, a debtors exam may cause problems if you or a representative don't show up. A warrant could result, (and IANAL) I don't think judges would be inclined to issue a warrant for your arrest, especially so if you live abroad. That being said, debt collectors most definitely will tell a debtor that a warrant will be issued for your arrest.

More germane to your friend's problem; I'd suggest that communication is the key. Discuss this with your lender, make them aware of your situation and do all of this in the written form.

Even in the best of times most lenders will some degree of understanding, and have processes in place for problem such as this (redundancy, lack of free cash flow). And if not at least you've got the paper trail indicating good will on your part.

In the terminal case, bankruptcy, well, I have known some ex-pats that tried to file personal bankruptcy while resident abroad to discharge US based debts. The problems here are
  1. Which state do you claim to live in, as bankruptcy is done at the state level
  2. Can you prove residence i.e., have you been filing state tax returns?
  3. and the killer is residency; most US states will have minimum residence requirements to allow you to access the courts for the purposes of filing
  4. In other words, you can only file for bankruptcy if you live in The United States<>
Hope this helps!

Disclaimer: I don't have any direct, personal experience with this, but I worked for several years in Africa with some rather colourful characters who got themselves in a fair amount of trouble from time to time. A few did actually default on US based loans, with various degrees of success and some rather startling ramifications. But being arrested at US Immigration wasn't one of them.
posted by Mutant at 5:26 AM on March 18, 2009 [1 favorite]

There was a "This American Life" sometime last year about a guy that was arrested in Chicago I believe after his plane landed because he had not been paying child support for 10 years. I think it depends on who you owe the money to and how bad they want it. In his case, he owed the government and they came down hard.
posted by chillmost at 5:39 AM on March 18, 2009

Best answer: Arrests for delinquent child support payments are relatively commonplace. This is not the case for student loans. This is a very clear outline of the worst case scenarios, and none of them include arrest.

Regarding Mutant's points about bankruptcy, your friend should be aware that student loans are not dischargable. Bankruptcy will not help.
posted by DarlingBri at 6:03 AM on March 18, 2009

Best answer: student loans are not dischargable

The law has changed, but discharges are allowed in rare circumstances constituting "undue hardship" (which varies by bankruptcy district case law).

Anyway, according to State:

A federal or state law enforcement agency may request the denial of a passport on several regulatory grounds under 22 CFR 51.70 and 51.72. The principal law enforcement reasons for passport denial are a federal warrant of arrest, a federal or state criminal court order, a condition of parole or probation forbidding departure from the United States (or the jurisdiction of the court), or a request for extradition.

Defaulting on debt, other than child support, is not a criminal matter. The most they can do is sue you; if you're somewhere they have jurisdiction, they can garnish wages.
posted by dhartung at 9:47 AM on March 18, 2009

Response by poster: Thanks for the info, everyone. I'm going to tell my friend not to worry about having her passport confiscated and show her all the info here about loan deferment.

Mutant, I am really, really curious about the startling ramifications you mention regarding your acquaintances in Africa who defaulted on their loans.
posted by Wroksie at 10:03 AM on March 18, 2009

I really wish I could find that last Ask-me about defaulting on debt by an ex-pat with no intention of returning to the United States. Child support is court ordered, which is why it's a criminal matter to not pay. As far as consumer debt, they won't send you to jail, but presuming your friend ever wishes/needs to come back to the United States and do things like rent an apartment, get a job that requires a background/credit check, buy a car, get other credit, etc. she will likely be unable to do so. Those debts don't just magically disappear.
posted by mrmojoflying at 11:34 AM on March 18, 2009

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