The filing of a Chapter 7 or Chapter 13 bankruptcy has no automatically negative effect upon non-citizens with the need for debt relief.
However, in certain circumstances, the information that must be disclosed in a bankruptcy filing can adversely affect immigration status.
What Must be Disclosed in a Bankruptcy Petition?
To obtain a discharge of debt under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code, you must voluntarily provide an enormous amount of information about your financial and other activities over a period of time of at least 10 years.
Obviously, you must provide an accounting of your debt: amounts, where and when incurred, the identities of the creditors holding that debt, and so on.
You must list and value of your assets and your claims to assets—including cash.
You must provide your historical income.
You must provide your current monthly average and income expenses.
You must describe in detail various types of financial transactions and transfers of property or cash, sales of property, gifts made or received, losses from gambling, theft, fire, or other disaster, and other occurrences over varying periods of time prior to the filing of the bankruptcy case.
You must provide virtually any information or documentation requested by a Chapter 7 or Chapter 13 Trustee, creditor with subpoena, or U.S. Trustee that you either possess or that you can reasonably obtain.
Why must all of this information be provided?
This is a common question asked by many prospective bankruptcy debtors, regardless of immigration concerns.
Information must be provided because the (virtually) complete debt relief offered by the Chapter 7 or Chapter 13 bankruptcy process is an enormous governmental benefit for which one must be eligible.
Eligibility in bankruptcy means, yes, income eligibility for Chapter 7 or eligibility with regard to allowable debt limits in Chapter 13.
Eligibility in this sense pertains to the underlying eligibility criteria for a bankruptcy discharge: that the person filing the Chapter 7 or Chapter 13 case must be an honest debtor.
Bankruptcy in the United States is a benefit for those debtors who are honest and have not engaged in fraudulent behavior—and who are honest and fully disclosing within the bankruptcy process itself.
A debt incurred via fraud is not dischargeable in bankruptcy.
Forms of bankruptcy fraud such as the hiding or fraudulent transfer of cash or assets can not only result in the avoidance of such transfers in a Chapter 7 bankruptcy but, in any form of bankruptcy, can result in the denial of the debtor’s discharge—and the debtor’s possible imprisonment for up to 5 years.
And, of course, as assets can be seized and liquidated in Chapter 7 bankruptcy. If not fully exempted in a Chapter 13 bankruptcy, they can also require your monthly Chapter 13 plan payment to be higher than if that were not the case.
Assets must be disclosed, therefore.
Income and sources of income must be disclosed for the determination of Chapter 7 eligibility and, in a Chapter 13, to allow the court to assess whether the Chapter 13 payment plan filed by the debtor is feasible.
The bankruptcy process in the U.S. has a lot of moving parts, and it is not a process suitable for those who shy away from paperwork or have information of which they would prefer that the Federal government not be made aware.
This applies to the I.R.S. This applies to U.S. Immigration and Customs Enforcement (I.C.E).
Bankruptcy Disclosures that Can Result in Deportation
First, it is important to note that there is not direct line of communication between the U.S. Bankruptcy Courts and I.C.E.
However, it is even more important to note that everything filed in a bankruptcy case is publicly available online, via the Federal Courts’ PACER system and, sadly, often via Google later on. I.C.E. personnel routinely monitor social media. It is not problematic for other Federal agencies to monitor bankruptcy disclosures as well.
If you are not in the U.S. legally, the mere filing of a bankruptcy petition should be approached with caution.
You should consult an experienced bankruptcy attorney before proceeding. However, beware of “high volume” bankruptcy law firms which assign a lesser experienced associate attorney to meet with you at your initial consultation or, worse, a paralegal.
You should also consult an immigration attorney. Most bankruptcy attorneys are not immigration experts. The opinions of both should be sought before proceeding. (But discuss your means of payment to the immigration attorney with your bankruptcy attorney first before doing so … No credit card use prior to bankruptcy!)
If you are in the U.S. legally as a lawful permanent resident or as a non-immigrant alien on temporary work visa, you are just as eligible for bankruptcy debt relief as any citizen.
The lack of a U.S. Social Security Number will cause an administrative inconvenience in the process, but an experienced bankruptcy attorney will be able to assist you with this.
Other issues are less easily resolved.
The most obvious issue would arise from a conviction for the Federal crime of Bankruptcy Fraud if you file for bankruptcy under the most dubious conditions and if you are willfully less than fully disclosing of the required informational disclosures in the process.
Bankruptcy Fraud is a Federal felony for which a person may be imprison for up to 5 years as well as fined.
A felony conviction will result in mandatory deportation for a non-citizen.
The Bankruptcy Code does not, however, require that other criminal offenses necessarily be revealed.
However, you are under an obligation to reveal all debts owed to any party, regardless of whether that debt is “on paper” or not (i.e., the $50 you owe to your grandmother) and whether or not the debt is dischargeable.
Do you owe court-ordered restitution for the crime of theft?
How about court costs for a drug conviction or for a crime related to prostitution or firearms possession (or misuse)? Were you arrested for domestic violence?
If so, you are subject to mandatory deportation under the Immigration and Naturalization Act (INA).
Crimes of “moral turpitude” provide a basis for removability if two or more not arising from a single scheme are committed within certain timeframes.
Tax debt or tax fraud charges with an amount owed to the government of $10,000 or more are also aggravated felonies potentially supporting a removal process for non-citizens.
Bankruptcy and Deportation: The Bottom Line
The bottom line is that, if you are a non-citizen considering filing for bankruptcy, it is essential that you consult an experienced bankruptcy lawyer who will not hand your file off to a lesser experienced associate or paralegal.
You will likely require the opinion of an immigration attorney in addition to the bankruptcy attorney.
Taking any kind of shortcut in the bankruptcy process or attempting to file the bankruptcy petition yourself just to save a few dollars in attorney fees is extremely unwise for non-citizens.
Attorney Walter Metzen has assisted thousands of Chapter 7 and Chapter 13 clients with the bankruptcy process for over 30 years.
A Board-Certified Bankruptcy Expert, Attorney Metzen will ensure that your bankruptcy case is handled with due consideration of all related issues.
Contact us to schedule your free consultation now.