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What Happens To My Debt When I Leave Canada

03/11/2013

One of the common emails and comments we get are from readers who find themselves wondering what will happen to debt if they move to another country. It isn’t always a plot to skirt responsibilities or rack up huge credit card balances with extravagant purchases and then flee the country. Sometimes there are legitimate reasons to leave debt behind and more commonly, the question is posed because consumers genuinely want to have their finances in order before they move, and when moving or changing countries, the United States is just a common destination. In this post, we will look at the situation in Canada.

Credit Reporting in Canada

http://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca02179.html

Credit reporting in Canada works a lot like it does in the United States with the same credit bureaus. In Canada, the main credit reporting agencies are Equifax Canada and TransUnion Canada, which hold all of the credit records from banks and finance companies in order to keep track of everyone’s credit worthiness. Credit scores by Equifax and TransUnion range from 300 to 900 and determine all of the regular things like whether a borrower is high or low risk and the interest rate. In Canada, lenders ratings on a scale from 1 to 9 may also be included. A “1” would mean you bills are paid within 30 days of the due date, while a “9” would mean you never pay your bills. There is also a lettering system with “I” meaning installment basis and “O” meaning open line of credit. So, on the credit report, you may see I2 or O9, for example.

If You Don’t Pay Your Bills in Canada

It’s safe to say if you don’t pay your bills in Canada, you’re going to suffer much as you would in the United States. Bad credit may result in credit and loan denials, high interest rates and potential lawsuits. According to ServiceAlberta.ca, if your debt is less than $25,000, the creditor may sue you in the Civil Division of Provincial Court which can lead to property being seized or wages being garnished.

Statute of Limitations and Leaving Debt in Canada

If you are unable to pay your bills and plan on moving from Canada, you may want to look into the statute of limitations for the province in which you live. For example, in Alberta, the Limitations Acts allows the time for suing on a debt to 2 years. If there has already been a judgment against the debtor, the time period is 10 years and can be renewed by the creditor. The BC Limitation Act in British Columbia is set at 6 years and in Newfoundland and Labrador, 2 years. According to Section 32 of the Crown Liability and Proceedings Act, things may be a little different when considering different debts such as student loans, child support, taxes and alimony.

Additionally, the Statute of Limitations time period may be reset when you start making payments or acknowledge the debt in the form of payment or something written. This would mean that if you move from Canada and completely forget about your debt, don’t make any payments and don’t correspond with the creditor past the statute of limitations, the creditor will not be able to take any legal action against you for the debt. The debt will remain on the credit report until 7 years from the date of last activity.

If you have any assets in Canada when you leave, the creditors may be able to seize those assets in Canada. This would include retirement accounts which can be used to pay off any debt you have left behind.

Will My Bad Canadian Credit Follow Me?

According to Experian, you cannot transfer your credit history from Canada to the United States. In order to establish credit in the U.S. , you would basically start over and obtain a credit account and build your credit with a positive repayment history or a secured account, much like you never had credit before. If you have an account with a multi-national lender, you may be able to transfer the account itself to the U.S. division to kickstart your credit history. American Express is one company that has been known to do this and sometimes banks can transfer payment histories on accounts. Depending on your situation, this can be either good or a pain in the neck as far as credit is concerned.

Angie Mohr, Canadian Chartered Accountant and author of a number of personal finance books, has personal experience with having to start over building credit in the United States. “The Canadian credit score doesn’t follow people to the U.S.- which is a huge issue for those who have stellar credit in Canada but get dinged in the U.S. because all of their U.S. credit is so new.” However, when you return to Canada, your credit score in the United States may be incorporated with your Canadian score.

What Happens If I Return to Canada

Unlike leaving credit card debt in a country like Singapore and returning, you won’t be declared “bankrupt” by your creditors. If you return to Singapore after having been declared bankrupt in the courts, you could have a difficult time finding a job and any of your belongings may be seized. In Canada however, returning could be less eventful with just a bad credit rating waiting for you.

It is always best to tie up any loose ends and see which accounts can be transferred before you move to another country. After all, you never know when you may want to return and it’s always easier if you left under good terms. It is also far less of a hassle to deal with your creditors than attempt to avoid them.

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9 Comments
Craig
January 29, 2016 @ 11:06 pm

I recently moved from Canada to the US full time. I have some credit cards in Canada that I am paying off but I just received a notice of collections from one of the credit cards and they are using a US collections agency. Can these affect my US credit that I have established when I lived in the US before I moved to Canada? I would like to focus on my US credit to get the best score possible and want to make sure my Canadian stuff cannot affect it in any way.
I am a Canadian citizen who moved to the US for college and worked after for several years, moved back to Canada for three years and am now back living in the US where I will be living permanently in case there is any confusion.

Thanks

Reply
Harvey
February 22, 2016 @ 2:16 am

I believe my Canadian fiancee is being gouged by a finance company on her car in Canada which has exorbitant interest attached and a huge negative value. She was forced to purchase it as a used car by her ex. If she moves to the US, and I cover her expenses and she just leaves this car behind and allows it to be re-possessed, what happens? The car is in her name only.

Reply
zaddy
July 25, 2016 @ 12:12 pm

Greetings Christina

I came to Vancouver, Canada on a study permit in 2003 and left the country in 2006 as a consequence of refusal of my study permit extension. In the meantime, I received credit cards from three different banks through online application for small limits which total upto CAD 3000. I came back to my country and never had a chance to return back. I hold the intention of repaying the banks and settling my debt but I was and am helpless at the moment.
I am planning to apply for my immigration/PR and migrate to the country that I hold very dear to my heart due to my past experiences. Could you please suggest me the best solution which I could follow so that I dont land up in any sort of trouble. Also please let me know if any criminal case would be filed against me as it has been over 10 years since I contacted or made payments to the bank.
I request you to give me an easy and honest opinion.

Awaiting your reply with eagerness

Thanks and regards

zaddy

Reply
    Riya
    March 2, 2017 @ 4:33 pm

    Hi daddy

    I have exactly the same problem. Did you get a reliable answer? Will our unpaid credit card bill impact our express entry immigration?
    Please reply

    Reply
      Riya
      March 2, 2017 @ 4:34 pm

      Sorry it’s Daddy*

      Reply
        Riya
        March 2, 2017 @ 4:34 pm

        Zaddy*

        Reply
    raj
    July 19, 2017 @ 6:14 pm

    did you get any reply? i am sailing in the same boat.

    Reply
Steve
February 28, 2017 @ 5:58 pm

Hi there,
Left Canada 17 years ago with a debt of around 15-20k and my intention at the time was to go to live and work in the UK and then return one day to pay my debts off in full because my card companies were making it difficult to pay my debts off in British currency. I wrote them all a letter explaining this back 17 years back and left it at that. I have read your notes about this and was wondering is going to be any concern if I move back to British Columbia or do I still have to deal with this if I we’re to move back in years to come.
Thanks
Steve

Reply
Jenna
April 28, 2017 @ 4:29 pm

So I planned an event in Canada and they gave me an invoice then later tried to come back and get more money from me. They were awful communicators and terrible business people, anyways, I canceled my debit card so they could no longer charge me. I owe them about $188 right now and do not have the money to pay it. Can/ would they come after me for so little of an amount? What would be the consequences if I did not pay it?

Reply

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