Heavy US Debt: bankruptcy, stop paying or something else?

Hi All,

This is my first post on here, though I have been a lurker for a long time. I'm turning to you for advice as I feel like I've hit the end of road and need to make a decision.

I'm very heavily in debt in the US. Some of it was from poor spending choices, but most of it was from being under employed in the past and needing to make ends meets. I was able to maintain payments for a while, but interest rates have now spiralled out of control to the point where I can no longer sustain the debt and also meet my budget requirements here in the UK. Also, the fall of the pound from around £1.50 per dollar to £1.20-£1.30 post Brexit referendum has had a large impact as well. My debt in the UK is pristine; I was able to transfer my US Amex card over for a UK one as well as open a Visa soon after. I also own my own home.

There are also some mental health reasons surrounding this debt, which I will not get into here.

I have no plans to move back to the US and as my wife is not a UK citizen, if we ever left we would move back to her country, not the US.

I know I should not abandon my debts as I've read on other posts, but realistically, I only currently see a binary choice between stop paying my US debt (except my US student loans) and endure the 7 years of my otherwise excellent US credit rating plummeting to "CRAP" level, or applying for bankruptcy.

Some of you might say that this could might affect my application for UK citizenship and while I take your point I will say this in response: When my wife and I applied for a mortgage for our house, there were questions about debt and we were told on more than one occasion that UK debt doesn't count, please do not put non UK debt on the mortgage application form. I would assume that the same would apply to the UK citizenship application form? Though the form doesn't specify, I would assume it is referring to UK debt you have not paid or abandoned?

I did think about seeing a debt counsellor, but I don't think a UK charity could help with US debt? And could a US debt charity help as well since I have no US income? I suppose I could get the credit card companies to freeze the interest, but I would still have the massive mountain of debt to pay off, and I still wouldn't have the money to pay all my UK bills and the US.

Is there another option I am missing?

I appreciate you friendly and informative advice.

If you need to file bankruptcy, file bankruptcy.  You'll want to consult and employ a good bankruptcy lawyer in the USA, as there are steps that need to be taken to protect your home (if you don't, it could have to be sold to pay back your debts).

Yes, a USA bankruptcy may affect a UK citizenship application, as you must declare a foreign bankruptcy under the Good Character clause of the application. 

A UK mortgage application is completely different to a UK naturalisation application.  It's a shame that the UK mortgage didn't require you to declare foreign debts, or you likely wouldn't have ended up in this position (as they've allowed you to over extend yourself).  But that's a different discussion all together.

Welcome to the forum .

I don't know much about filing bankruptcy, so I can't really help there, but as KFDancer said, ALL bankruptcy needs to be declared on the UK citizenship application, regardless of country it happened in.

The requirements for mortgages are completely different to the requirements for UK citizenship, so you can't compare the two when it comes to financial standing and credit scores.

For a mortgage, they just need to know you are reliable, have good credit, and will be able to afford to make the payment on the loan each month... they need to make sure that you aren't going to default on the mortgage.

But for UK citizenship, they are checking your character as a person - are you an upstanding citizen who deserves to become British... or are you a risk to society?

So they look at things like:
- do you pay your taxes?
- do you have any previous criminal convictions (in any country)?
- do you have any civil judgements or cautions against you?
- have you ever had financial troubles (in any country)?
- have you ever lied/used deception on a visa application?
- have you ever been involved in terrorism/war crimes/crimes against humanity?

Some of you might say that this could might affect my application for UK citizenship and while I take your point I will say this in response: When my wife and I applied for a mortgage for our house, there were questions about debt and we were told on more than one occasion that UK debt doesn't count, please do not put non UK debt on the mortgage application form. I would assume that the same would apply to the UK citizenship application form?

Do you mean US debt doesn't count?? Asking as I found when applying for my mortgage that they asked ONLY about potential UK-related debt and didn't care at all what I had going on outside of the UK.

How far back would a bankruptcy impact an application for citizenship? Would 15 years (due to ill health) with anotherwise pristine record since then cause an application to be denied?