Bankruptcy and Foreign Assets

Assets in foreign countries could still be subject to collection in bankruptcy.

If you are considering bankruptcy but have assets in foreign countries, those assets can still be tapped to satisfy creditors. If you don't transfer the assets, you could be held in contempt.

Bankruptcy Law

When you file a form B200 to file bankruptcy, you must declare all assets and liabilities. The law makes no exception for assets held outside of the United States. The tax code is similar: You must declare income from whatever source derive. No exception or loophole for income from foreign sources is available.

Jurisdictional Issues

Few foreign courts are inclined to honor judgments in U.S. courts directing foreigners to transfer assets held overseas to bankruptcy trustees in the United States. This difficulty is a hurdle and deterrent to bankruptcy collection efforts. A creditor may choose to settle favorably rather than pursue expensive litigation in a foreign country to seize your assets.

Contempt

A foreign court may not honor a U.S. judgment. But if you refuse to honor a court order by transferring assets to creditors or to the bankruptcy trustee, a U.S. court may hold you in contempt -- and throw you in jail until you comply.

Trust Planning

By placing assets within an irrevocable trust and placing that trust offshore, you may be able to inoculate yourself against a contempt charge while still protecting those assets. You do, however, give up control of the asset for good.

References

• Lawers.Com: Must Foreign Assets Abroad Be Listed?
• Asset Protection Law Center: More Analysis of the Anderson Case
• Asset Protection Theory: Foreign Asset Protection Trusts
• U.S. Courts: Chapter 15 of the U.S. Bankruptcy Code: Ancillary and Other Cross-Border Cases

Resources

• Asset Protection Book; Jay Atkisson, Scott Riser; 2004