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Does Filing Bankruptcy Affect a Non-Citizens Immigration Status?

Usually not.  But in some limited situations the indirect consequences can be huge.

Considering what’s at stake, if you are either a legal or illegal immigrant considering filing bankruptcy, this is definitely an area where you need the advice of both a bankruptcy and an immigration attorney. It’s my job to give my clients advice, but sometimes the most important thing to tell them that they need the additional help of another professional. This is one of those situations.

When you go to meet with each attorney, here are some general principles that can guide your consultation with them:

1) Just as the bankruptcy documents don’t ask you anything about your citizenship status, your naturalization application will not directly ask anything about filing bankruptcy. Bankruptcy is a legally accepted method for dealing with your debt. In fact it may even help you avoid dealing with your financial circumstances in more desperate ways, ways which could jeaopardize your immigration prospects.

2) To become a lawful permanent resident or citizen, an immigrant must establish “good moral character.” It is conceivable, although not likely, that your bankruptcy filing could be seen as an issue of moral character. Immigration is considered on a case-by-case basis, so you need to talk with an immigration attorney thoroughly familiar with current practices.

3) If you have been convicted of one of a certain set of crimes, or if you reveal during your bankruptcy proceeding that you committed one of these crimes, these could adversely affect your immigration status. Certain crimes could even result in deportation. Examples include crimes of “moral turpitude” like using credit cards in other people’s names, writing fraudulent checks in more than one state, tax evasion, fraudulent transfers of assets, or providing false information to the federal government (for example, in bankruptcy petitions!).

4) Your citizenship application will ask if “you have ever failed to file a required federal, state or local tax return,” and whether you owe any overdue taxes. Bankruptcy can legally write off some taxes, but there may well be adverse immigration consequences for doing so. This is especially problematic if you have been working and getting paid “under the table,” and not having taxes withheld.

5) If you’re not legally in the U.S., you are definitely exposing yourself to the legal system by filing bankruptcy. False social security numbers—either on the bankruptcy documents themselves or even on prior credit applications—would likely lead to huge problems. In some parts of the country, U.S. Attorneys appear at the Meeting of Creditors to ask about these and other immigration related matters. You are under oath and may find yourself in a very sensitive and dangerous situation.

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Can Non-Citizens File Bankruptcy?

The answer is simple: Yes.

The Bankruptcy Code does not limit who may file based on citizenship status. It states that “only a person that resides or has a domicile, a place of business, or property in the United States… may be a debtor… .”  The “person” is simply defined to include an “individual” (as well as a “partnership and corporation”). The point is that there is no requirement about needing to be a citizen, or even to being legally in the country. So everyone, citizen or non-citizens, legal or illegal, can file bankruptcy.

But the person must meet one of the above categories of who may be a “debtor.”

One often used category is to have a “domicile,” meaning simply being physically present in one location with the intention of making that place the person’s present home. Generally the longer the person has been in one place and the more he or she has put down roots—such as getting a state drivers license—the easier to show intent to establish a domicile.

Having any meaningful amount of property, such as bank or other financial accounts, or a vehicle, would itself likely be sufficient to qualify as a debtor.

Any other requirements? The bankruptcy filing documents ask for a Social Security number, but there is nothing in the Bankruptcy Code which requires that. If the person filing bankruptcy has a legal Social Security number appropriately issued by the Social Security Administration, it should be used. Otherwise, the person should get an Individual Taxpayer Identification Number (“ITIN”) from the IRS, and use that. The “IRS issues ITINs to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs.”

Anything else? In most places, the bankruptcy filer will also need to show proof of identity at the so-called Meeting of Creditors, to allow the bankruptcy to verify that the person present there answering the questions under oath is a real person and the one who filed the bankruptcy documents. This aims to prevent identity scams. Proof of identity generally requires two things: 1) a document showing your SSN or ITIN—such as the original Social Security card it that’s available, or some other paper received from the government or from an employer showing the number; plus 2) some form of photo identification—such as a driver’s license or passport.  

So is that it? Well, yes, with these conditions met the non-citizen can file for bankruptcy. But two big questions remain that just can’t get swept under the rug—

1. Would a non-citizen potentially have problems qualifying for any of the benefits of bankruptcy, such as getting a “discharge” (legal write-off) of the debts, or claiming property exemptions in order to keep the property?

2. Does filing the bankruptcy harm a legal non-citizen’s efforts to become a citizen, or does it increase an illegal immigrant’s risk of deportation?  

Sorry for keeping you in suspense, but I’ve covered enough for one day and so l’ll address have to these important questions in my next two blogs.

 

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