As is most likely apparent from the title of this posting, I generally intensely dislike the “Asset Recovery” industry. Yes, I know they fulfill a purpose: Before I was in the marine industry, I worked in finance, so I know both sides of the argument. Debt collectors nowadays are the “bottom feeders” of the financial world. There are many bona-fide collection agencies out there, and a bona-fide agency will comply with all laws in trying to collect a debt. However, the boom in collection services in the States, especially in the last few years, as the result of the economy and of changes to US bankruptcy law, has meant a huge upsurge in the number of questionable, and sometimes outright fraudulent, companies in the market. With the global economic downturn, I see more and more stories on the Internet every day about people being harassed by collectors, or sometimes even becoming expats for that very reason? But, can you really hide from your responsibilities?
Everyone has had trouble paying a bill at one time or another in their lives. People get sick, spouses die, people get divorced, or sometimes lose their jobs. My first encounter with a collection agency happened when I was 20 years old, after a dispute with my landlord (It eventually went to court and I won). That encounter scared the crap out of me, until my attorney advised me of my rights. Later, as I got older, after a job loss, I went through a period of about 5 months when I got behind on bills, and I learned how absolutely despicable collections people can get. Calling me every 5 minutes, work and home, with auto-dialers. Threats to garnish wages and get me fired from any future jobs. The old jokes about lawyers are nothing… I rank bill collectors at the very bottom of the pile. Eventually, I got back on my feet, and several years later, I was harrassed for several months from no less than 20 different agencies trying to collect a debt on someone else… Who had a similar name, but was dead. The whole experience started because some skip tracer at an agency incorrectly listed me as the debtor. The debt was sold, resold, resold, and resold again umpteen times, each time with me having to file a report with the State’s Attorney’s office. That took over 2 years to finally go away. There are many legal ways in the States to deal with this type of thing, if you know the law, but this article is about the Philippines… Not the US.
So, you may think, “Hmmmm…. I can move to the Philippines and start all over.”
Well, many years ago, you probably could have done so, before the global financial system was computerized, but that is no longer the case. First off, in the States, there are certain debts that never go away, and can never be discharged in bankruptcy: taxes and student loans are two that come to mind immediately, since you owe Uncle Sam. Child Support payments, too. So, even if you declare bankruptcy, move to the Philippines, and give Uncle Sam the finger, those debts will still be there if you ever decide to return, and, in the case of taxes and child support, they can turn criminal if the IRS decides to pursue you. As soon as you reach passport control, your name will pop up on the agent’s screen, with a nice red flag next to it, and you get to potentially spend some time as a guest in one of Uncle Sam’s fine incarceration facilities. As to other debts, you can still be sued in the States, with a judgment entered against you if you don’t appear. Your credit is now ruined beyond repair in the States, and the creditors will place liens on everything they can find.
“There’s no credit bureau in the Philippines. They won’t know my past, I can still get credit!”
Well, that is not exactly true. In 2008, President Arroyo signed Republic Act 9510 into Law, granting the SEC the authority to establish the Central Credit Information Corporation (The Philippines first credit bureau). Now, the CCIC does not yet exist (It hasn’t been established yet), but its creation has been mandated by the Government, so it is highly likely that it is coming soon (There are advertisements for staff for the new bureau online right now). Previously, in order to obtain credit, you needed to build a relationship with a bank or other lender, and establish your own credit history. Additionally, it can be very difficult for foreigners to establish a credit history here, and having good references in the United States has proven very helpful to me since I moved here (e.g.: If you paid your electric bill in the States, you’ll probably pay it here, too.)
So, what if you have good credit in the States, but run into trouble here in the Philippines? My US credit report is secure, right?
Wrong again… My Citibank credit card here appears on my US report, as does my HSBC card from the UAE. You see, as a foreigner, one thing you will absolutely have to provide in order to obtain credit here is your passport and, most likely, your ACR card. With that information, any creditor in the Philippines can report your history to the US Credit Bureaus, and the US credit bureaus will accept that report. Banks aren’t stupid, and they know that the credit bureaus exist. Why not try to gain a little leverage should you return home and not pay your debts here?
So, you fall behind on your debts in the Philippines. There aren’t collection agencies here, right?”
There are collection agencies in the Philippines: Lots of them. Most of them do a booming business in operating call centers for US based collection agencies (The Philippines is the global leader, followed by India, for collection calls). So, that call you received at home in Montana likely originated at a call center here in the Philippines. Think they can’t harass you here? Think again! The only difference is that in the United States, you have legal protection and well-defined legal rights. Oh, there is a Philippine Law protecting you here (Maximum fine per violation is 200 Pesos. Think they care about that?), but I was unable to find even anecdotal evidence online of that law being enforced. Quite the contrary, there were numerous stories about people being threatened with jail time unless they paid up. There are also many stories about vioence being used against debtors, harassment of family members who don’t even owe the debt, or people owing debts being detained at the airport by immigration until they paid up. So, if you got yourself into deep financial trouble in the States, it is best to do everything you possibly can to avoid the same problems here!
So, what about my debt now? Will it go away?
Realistically, it is unlikely that creditors will pursue you here unless you owe a very large sum of money. Most people make an attempt at paying their bills, and just get hopelessly behind. Since you can’t be arrested for a private debt in the States, you are “OK” on that front as well, as long as you don’t need to return to the States and obtain credit. If you owe child support or taxes, then “pay up” is about all you can do. However, these things can return to haunt you. If a debt becomes criminal, like child support, you will eventually need a new passport. Guess what? The US Embassy is considered US soil. You could renounce your citizenship, but the Philippine government looks at both your financial history and criminal history before granting you citizenship. Skip tracing you to the Philippines is somewhat difficult, and with SIM cards so cheap, if you get harrassed, simply swap SIM cards. But the debts are still there. Additionally, when you apply for residence, financial ability and responsibility must be proven for a Visa to be issued. Can’t prove it? Then you are a tourist, perpetually having to move about until you face the music.
However, most expats still derive at least some income from foreign sources while living here, or have significant assets still remaining back home. These assets and cash flows can still be subject to garnishment or liens. In the end, it is just simply best to make arrangements with lenders and pay what you owe. Once you are overseas, the difficulty in collecting debts increases substantially, and they are far more amenable to working with you to pay things down.