I have a colleague who is going back to his country after staying for a couple of years in US. He has 3-4 credit cards plus a personal loan. His total debt would come to around $10,000. Some days ago, he told me he is going to default on the accounts. He figures, since he is not planning to come back to US, it should not matter to him.
Question is, is this a bad move on his part, and if it is, how can I convince him?
For starters that may be criminal fraud. Since he's defaulting not because he's bankrupt but because he just doesn't want to pay - he's in fact stealing, or at least committing fraud. That type of criminal offenses would be criminal in his home country as well (I am not aware of any country that doesn't criminalize stealing and fraud), and he may be prosecuted if the US government does file a complaint, even if he's "at home". I do not know of any country that limits its criminal code only to their own territory. He may also be extradited back to the US, if his home country has such a treaty.
That said, if he has no intentions to come back to the US now - he may change his plans in the future. It will be too late to "change his mind" then, he will be in big troubles, may be arrested on landing, denied visa, most likely denied any credit, and harassed by collectors.
Last but not least - the debt is a contract between him and the credit card company. Even if the US doesn't file a criminal complaint at home - the credit card company may file a civil complain and sue him for the money. The courts in his home country will likely to accept jurisdiction since he refused to return to the US.
Bottom line - stealing is wrong, and the victim ( the bank/credit card company) may very well go after him wherever he goes, and for a long time. Statute of limitations in the US doesn't advance while he's out of country, so the matter may still be open even if he comes back in 50 years, and the victim may also pursue action against him in his home country.
He is not stealing. He is defaulting on his debt. There is a huge difference. I don't know the USA law on this, nor his home country, but the USA & his home country has to have bilateral agreements about extradition and legal proceedings, and even if they do, you will never get extradited over such small an amount of 10.000 $. He might end up paying it in his home country anyways, but I highly doubt it.
I agree he should honor his contract, however if he does not, the credit card company will ultimately charge-off their debt and sell the debt to a collection agency (typically for 2 cents on the dollar). At this point he cannot pay the original creditor as they no longer own his debt, the collection agency is the legal owner of his debt. Collection agencies often accept 15 - 30 cents on the dollar as payment in full. If the collection agency agrees to a reduced payment, and they nearly always do, then he is done.
If he does not pay the collection agency, they will file a civil case, however they cannot serve him so the case will be automatically dismissed. After 7 years the charge-off will be removed from his credit report.
I wonder what action the police would take if you reported him as suggested by DJClayworth. Maybe he is suggesting you report him to the customer service rep? I suppose they could add a note in the comments field.
I would not tell your friend that the US government will pursue a credit card debt in a foreign country, because your friend will know that is silly. The US government will not be involved in a civil matter. He may then ignore anything else you tell him. Tell him to honor his contract.
Your friend can be arrested if he returns to the US if he is charged with a crime. This is not a criminal matter.
