More specifically, when someone takes out the highest loan amount from the bank that they can & then flees the country in order to not pay it back, what exactly happens in such cases?
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It depends on where you go and if you’re considered to have committed a crime. Also depends on how openly you live and if you’re findable. Most of the time owing someone money is civil, but if you take a huge loan and split, you’ll probably be accused of some sort of fraud in connection with getting the loan.
Countries will work with other countries to send people back for criminal trial thru a process called extradition but it’s fairly hard and lengthy. And dealing with multiple legal systems in order to sue someone in another country is expensive.
What’s most likely to happen is they you’ll be sued in the country you received the loan and get a default judgment against you. Debt eventually becomes too old to be legally collectible but a judgment doesn’t. They would then seize anything you left in the country. Eventually if you received an inheritance in that country it would be subject to their judgment also.
Basically, this can work if you have nothing left in that country, never plan to return, and can disappear into your new country. But it’s a bad idea for just about everyone. You can never know how much time, money, and effort they’ll put into catching you.
Nothing buddy. Source: have several family members/friends who have done it and fled to Dominican Republic (their birth country) some have even come back and nothing happens to them but a bad credit score. Only talking 30-80k here though. Can buy a nice house to retire out there with that though
So many bad takes on this. It’s super easy to get a bunch of loans and then just leave. No one will do anything. The police aren’t arresting you for fraud.
That depends on which country they have fled to and how much it was.
A Chinese individual who got a domestic loan and fled to the US is likely to not suffer any persecution in the US. Same as for a US citizen who fled to China.
If a British individual with a green card fled to the US and it was a loan of <1 million, it is unlikely that the US will send the US Marshals to find and jail the British citizen.
If a British individual with a green card fled to the US and it was a loan of several millions, it is now likely that the US will send the US Marshals to find and jail the British citizen and extradite him/her.
You asked about what happends to the individual, and in most cases, nothing actually happens. However, banks will seize assets in country of origin, will communicate with other national banks so that they will never lend money to that individual again or even refuse to open account, domestically or abroad. So for example, that British example, and borrowed money from HSBC ; it will likely be unable to borrow money or even open an account in Barclays in the US.
It’s rarely worth doing, even though you can get away with it. Only time I can see it is if you have to flee the country anyway for another reason then might as well max out everything.
Check the statute of limitations on the debt – then come back once they are passed and do it all over again.
In Brazil they “forgive” the debt after 5 years. Although I don’t know what’s the maximum amount.
This sounds like fraud and I’d be concerned that this would be a crime. And committing a crime and then fleeing is just adding to possible criminal charges. If you come from a country with extradition treaties, it can be pretty tough to escape to a country without one. Particularly a country that you would actually want to escape to.
The one exception maybe would be if you have citizenship in this secondary country. France, for example, won’t extradite its own citizens even if they happen to have citizenship elsewhere.
As others pointed out, banks don’t just hand out loans for shits and giggles. You usually have to take a loan out for a very specific purpose. To fund a business expansion, purchase a vehicle or a home, etc… They would be able to seize those assets if you defaulted on your loan, and possibly any other assets you may have.
So essentially there is absolutely nothing to stop you from doing the “got a terminal diagnosis, rack up insane amounts of debt” strategy?
It depends on the country the debt is incurred.
For the US, loans are civil agreements between two parties. The creditor accepts that risk when they loan you the money. Fraud is only an issue if you knowingly lied or misrepresented yourself on the application. You can not be arrested in the US for unpaid debt.
If you leave the US with unpaid debt, the creditor will likely attempt to get a judgement against you. That judgement would be enforceable, possibly as asset seizure or as a wage garnishment if you work for an American company.
If you leave the US, have no American assets, and don’t work for an American company, then the judgement will sit there until it expires. The expiration varies by state; usually 4-20 years. After that, the debt is not enforceable.
Student loan debt never goes away, however foreign income would never be garnished for American student loan debt. If you claim social security benefits, a small percentage is garnished. I believe 25%.
Taxes are not debts, but legal obligations. You can go to jail for not paying that, however it would have to be a big enough amount to make it worth the IRS’s limited resources and time to prosecute you.
TLDR: if you leave the US and don’t work for an American company, nothing. Especially once the judgement expires.
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