Immigrants do not need a social security number to file for bankruptcy protection. They do not need naturalization papers or even legal status. According to the Bankruptcy Code, any who owns property, has a business place, or is domiciled in the United States can file for bankruptcy. Moreover, Bankruptcy Official Form 121, which seeks information about social security numbers, even has a box that filers can check to indicate they lack a social security number.
What Bankruptcy Does
Bankruptcy is a parallel federal court system that allows debtors overwhelmed by their debt to seek protection from their creditors and reorganize their debt. The bankruptcy code provides several different methods for individuals to file for protections, notably, under Chapter 13 and Chapter 7. Basically, filing for bankruptcy protects certain property owned by the debtor, such as his or her primary car, home, and retirement.
Potential Risks in Filing
While an undocumented immigrant may file for bankruptcy protection, the act of filing could invite additional scrutiny of their immigration status by law enforcement. Therefore, an undocumented immigrant should consult with an attorney before filing for bankruptcy.
The first consideration an undocumented immigrant must take is whether he or she used a “borrowed” social security number and, if he or she did use a borrowed social security number, if that SSN was used on any debt that would be administered through the bankruptcy system. The debtor must carefully consider this issue because all social security numbers used to incur debt must be disclosed on Form 101. If any numbers are omitted, the debtor could face criminal penalties.
Further, using borrowed social security numbers could implicate other potentially criminal and civil penalties. For example, the debtor could face tax fraud or identity theft charges. Moreover, the creditor who issued the debt could commence adversary proceedings alleging the debtor lied to the creditor to trick them into lending them money. The debtor can raise defenses to the allegation, but it would inevitably increase costs and likely expose the debtor to additional scrutiny.
The second consideration is that filing for bankruptcy could imperil naturalization proceedings. While filing for bankruptcy does not per se affect a citizenship application, it could nevertheless be affected. The Office of the United States Trustee is obligated to refer to the U.S. Attorney any issues regarding a debtor’s immigration status.
The third consideration is that debtors must periodically submit documentation for their case to proceed. Specifically, the debtor must submit proof of residency and identity to advance their case. While debtors don’t need to provide proof of identification to file a case, debtors will have to submit proof of their identity to the U.S. Trustee periodically. Undocumented immigrants can apply for an ITIN from the IRS as an alternative to an SSN. An undocumented immigrant might also struggle with financial records such as proof of insurance, proof of title, and income proof.
The final consideration concerns bankruptcy exemptions under state and federal law. While undocumented immigrants can avail themselves of most federal exemptions, many state law exemptions are restricted to citizens.