Does US debt follow you to Canada?

Posted on 8 December 2022

Written by Chris Galea

Perhaps you are a dual citizen of both the US and Canada, or an American looking to move to Canada. What if you have debt or bad credit – does this transfer to another country? Do you need to start over? Does US debt follow you to Canada? Canada has always had a strong relationship with its southern neighbour, and in this article we will explore whether or not US debt follows you to Canada. While generally your credit history does not transfer when you move to another country, there can be financial obligations still owed to the US. For instance, Canadians who live in border towns may work and shop in the US, and others may have attended school there or carried out business in the US and may have incurred debts. Others wondering if US debt follows you to Canada may be American citizens looking to move to Canada and leave behind their US debts. You may also wish to start building new credit in Canada. So, what happens when you have US debts and live in Canada? In this article, we explain all you need to know.

Does US debt follow you to Canada?

If you earn an income in the US, or have assets there, collection will begin there. Your American creditors will pursue you in the US – if you owe a foreign debt, your creditors will collect in the country where the debt began, especially if you have income or assets in that country. When it comes to US debt following you to Canada, what is interesting to note is that there is no automatic cross-border collection. If, for instance, you live in Canada and default on your payment of an American debt, your US creditors will likely begin collection calls. That said, it is costly for them to pursue legal action against you across an international border to collect on your Canadian income or assets. In order to pursue legal action against you in Canada, a US creditor would need to obtain a judgement in the US, and then bring that judgment to a Canadian court. If granted, this would allow your US creditor to collect in Canada. Given the time and expense needed to go through this process, most US creditors will not bother pursuing legal action against you if the debt is relatively small. This also leaves you at a relatively low risk of a wage garnishment, too.

How does bankruptcy work if you move from the US to Canada?

In Canada, a Licensed Insolvency Trustee is only licensed to file either bankruptcy or a consumer proposal in Canada. Likewise, a US bankruptcy lawyer can only file bankruptcy in a US court. If you have a lot of debt in the US and you are moving to Canada, you should speak to both a Canadian Licensed Insolvency Trustee and a US bankruptcy lawyer. If you have an income or assets in Canada, it may be best to file either a consumer proposal or a bankruptcy in Canada – you can include your US debts as part of this. In Canada, both consumer proposals and bankruptcy automatically trigger a stay of proceedings, which means you are protected from creditors both in Canada and the US. Once you are discharged from bankruptcy or complete your consumer proposal, your US debts will be discharged – but only in Canada. If you have income or assets in the US, your creditors can still pursue you in the US, despite filing debt relief in Canada. In order to receive the same protection against your US assets and income, you will need to work with a US bankruptcy lawyer to be discharged from your debts in the US.

What happens to your US credit history if you move to Canada?

Whether you have a good credit score, or a credit score that needs rebuilding, you are likely wondering if your US credit history transfers to Canada. Your US credit history does not in fact transfer to Canada, or reflect for Canadian credit bureaus when you move. Both countries have their own systems for credit reporting, each with its own rules. This means that credit information is not shared across the border. Subsequently, you will need to build a credit history in Canada with new creditors that align with Canadian credit bureaus. If you have a good credit score in the US, it is a good idea to create a copy of your credit reports from the US to show to prospective Canadian lenders as part of their assessment of you. Some creditors operate in both countries, in which case you may be able to transfer your US accounts to Canada. This can enable you to build a new credit history much more quickly.

How can you begin establishing credit in Canada?

If you are moving to Canada from the US and do not have credit history there, you will need to begin all over. If you have a good score in the US, unfortunately you will need to start from scratch. If you do not have good credit, moving to Canada will mean you leave it behind so this can give you a fresh start. There are a few simple steps you can take to begin building your credit history.

  • See if your US bank operates in Canada. If your bank also operates in Canada, they may be able to transfer your account if you have a good credit history. This can also make it quicker for you to be approved for a line of credit in Canada so you can start building your credit history.
  • Open a secured credit card. It can be difficult to gain approval for a regular credit card when you first move to Canada, which is where a secured credit card can help. A secured credit card operates by depositing an amount of funds into a lender’s account in exchange for a credit card with a limit that equals that of the deposit. Secured credit cards are much easier to secure as your lender has collateral in the form of the deposit in case you are unable to pay your bills.
  • See if you can get a cosigner. If you have a family member or loved one in Canada with a good credit history, you may want to see if they will cosign your account. This makes them equally responsible with you for any debt, and so if they also miss payments or default, their credit score will be affected as well as yours.
  • Become an authorized user. If you have a family member or loved one in Canada, they may be willing to add you as an authorized user on their credit account. Not all lenders allow this, but it can fast track you to having an account that would otherwise be difficult to secure without a credit history.

Want to know more about ‘does US debt follow you to Canada’? Book a free consultation with one of the experienced Licensed Insolvency Trustees at Spergel. We have been helping individuals in Canada find debt relief for over thirty years, and we can help you too. Whether you need a fresh financial future, or want to rebuild your credit score, we are here for you. Reach out today – you owe it to yourself.


Chris Galea

Chris Galea is a Chartered Accountant and Insolvency and Restructuring Professional with over 20 years’ experience as an LIT (Licensed Insolvency Trustee). He is also our resident expert on tax debt, COVID debt, and the region of Saskatchewan, Canada. When he’s not at the office educating people about bankruptcies and consumer proposals, Chris is playing pick-up hockey with his friends, spending time with his family, and learning Spanish!

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