Filing For Bankruptcy As An Immigrant: What You Need to Know

By June 28, 2021 April 12th, 2023 uLink Blog
married couple look at tax documents

Hard financial times can happen to anyone. 

While declaring bankruptcy may lead to a temporary feeling of defeat, it’s an important first step to eliminating debts and reclaiming your financial independence.

For the record, bankruptcy is a legally-ordained proceeding. If you live in the United States and declare bankruptcy, it’s your legal right to do so — whether you’re a citizen, legal resident, or immigrant.

Though there are six different chapters of bankruptcy, Chapter 7 and Chapter 13 are the most common forms filed for individuals. 

Indeed, bankruptcy is far from uncommon. In 2019 alone, over three-quarters of a million people filed for bankruptcy.

Here’s everything need to know about filing for bankruptcy as an immigrant:

The Law Is On Your Side

For most immigrants, declaring bankruptcy will not affect your immigration status (or your application for U.S. citizenship). 

In fact, you don’t even need to be a U.S. citizen or have a green card to file for bankruptcy.  Though you don’t need a Social Security Number (SSN) to complete the paperwork, you will have to list your Individual Tax Identification Number (ITIN) to proceed with filing.  

Here’s some more good news: if you’re in the midst of completing your citizenship or green card applications, they won’t be halted by filing for either Chapter 7 or Chapter 13 bankruptcy.

Federal law protects you from any kind of discrimination on account of your bankruptcy. According to the United States Bankruptcy Code Section 525, “a governmental unit may not deny, revoke, suspend or refuse…a person that is or has been a debtor under the Bankruptcy Act.”

While the law is on your side, it’s important to note the rare circumstances where immigration authorities could potentially threaten your immigration status. 

Circumstances That Could Affect Citizenship

As you may already know, the application for U.S. citizenship hinges around a rather vague assessment of “good moral character.” 

According to the United States Citizenship and Immigration Services (USCIS), good moral character is defined as that “which measures up to the standards of average citizens of the community.” 

One of the leading metrics for a citizen’s character is their commitment to paying taxes. That’s why citizenship applications bluntly ask, “Have you ever not filed a federal, state, or local tax return?”

To be clear, bankruptcy cannot and will not be used to testify against your “good moral character.” As mentioned above, filing for Chapter 7 or 13 is a legally-protected action, and it is well within your individual rights to declare bankruptcy. 

However, if you have ever lied on any federal forms (like your tax returns), knowingly provided falsified financial statements, or have formerly been convicted of a crime, your bankruptcy filing could indirectly expose those wrongdoings and give the USCIS or Immigration Customs Enforcement (ICE) grounds to pursue further legal action (or the denial of your immigration application). 

The same is true if the reasons for filing bankruptcy are suspect — such as someone seeking to avoid paying alimony or child support.

As contrasted with assessments of “good moral character,” these crimes often involve an allegation legally known as “moral turpitude.” 

According to the Immigrant Legal Resource Center, “moral turpitude” is a technical and legal term “for a category of criminal offenses that can make a noncitizen deportable, inadmissible, and/or barred from relief.” 

Grounds for determining “moral turpitude” often center on crimes like tax evasion, writing fraudulent checks, identity theft, falsifying social security numbers, or illegally using someone’s credit cards.

Protect Yourself and Your Future 

Whether you’re simply doing your due diligence or are ready to file for bankruptcy, continually protect yourself at all points of your life by truthfully reporting your financial information to the government. 

There are no exceptions to this rule, and if you adhere to it, you will remain beyond reproach. 

Ultimately, if you have accurately reported your annual taxes, have not engaged in any illegal financial activity, and don’t have a criminal record, your bankruptcy will not trigger any further legal action against your immigration status. 

Still, if you are less confident in an assessment of your tax or criminal history, be sure to contact immigration, bankruptcy, and/or legal attorneys as you move forward with filing for bankruptcy. 

Leverage all of your available resources before you engage in any legal proceedings. 

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