Does my United States bankruptcy discharge my online Canadian payday loan?
No. Canada is not governed by the U.S. Constitution. (They’re actually a separate country). A U.S. bankruptcy affects U.S. debts.
That being said, there are a few needlessly academic explanations that I need to give.
The U.S. Bankruptcy Code is limited to states/territories/provinces/(maybe tribal reservations) who are part of the United States of America. For example: if you file bankruptcy in Utah, it will discharge your payday loan you took out in Florida last year.
However, you can now take out online payday loans in Canada which are then deposited directly into your bank account. You can try listing this Canadian entity in your U.S. bankruptcy, but you’ll still owe the money in Canada. I just had a client try to list Rapital Capital (based out of Quebec). I told him we’d try, but that it wouldn’t do much. That being said, if they have any American arms (branches), you should be able to discharge the debt and stop collection proceedings here in the U.S.
Back in the old days of bankruptcy, I had a client who was an airline pilot who took out a payday loan in Canada. He defaulted, and they sued him in Canada, obtaining a judgment. We filed bankruptcy and listed them. A few months later, they levied his bank account based on that judgment. I was shocked. He banks with U.S. Bank, which seems to imply that the bank account is in the U.S. I was wrong. U.S. Bank has branches in Canada, and they used that Canadian judgment to levy his Canadian branched bank account.
It’s complicated.
The best way to handle this is to NOT take out any online payday loans. That being said, if you really need to, definitely don’t make a contract with a foreign entity. I don’t know Canadian law: for all I know, they’ll still be able to collect the debt. Maybe if you enter Canada itself, they’ll be able to arrest you and brand your forehead with a maple leaf to show that you failed to pay your Canadian debt. (Probably not, but you never know).
