Foreign debt collection in the USA works through one of three routes into a U.S. court: asking a court to recognize a judgment you already won abroad, filing a brand-new lawsuit against the debtor in the United States, or confirming an international arbitration award under the New York Convention. Whichever route you take, success depends on a U.S. court having authority over the debtor, on acting before the clock runs out, and on knowing which of the debtor’s assets you can actually reach. Along the way, U.S. consumer protection law and a 30% federal tax withholding rule can quietly change the economics of the whole effort.
The Three Paths Into a U.S. Court
The right path depends on where the dispute currently stands.
If you already won a judgment in your home country, you can ask a U.S. court to recognize it. Recognition converts the foreign judgment into a domestic one that can be enforced against the debtor’s U.S. assets, and it avoids relitigating the merits. Recognition is governed by state law. Twenty-nine states and the District of Columbia have adopted the 2005 Uniform Foreign-Country Money Judgments Recognition Act, a few still follow the older 1962 version, and the remaining states apply common-law principles of comity.1Federal Judicial Center. Recognition and Enforcement of Foreign Judgments Under the uniform acts, the foreign judgment must be final, conclusive, and enforceable where it was issued, and it must grant or deny a sum of money. U.S. courts will not recognize foreign orders that simply require someone to do or stop doing something.
If you don’t have a foreign judgment, or you have reason to think it won’t survive recognition, you can file an original lawsuit in the U.S. That means a complaint, service of process, discovery, and trial if the case doesn’t settle. The procedure is slower and more expensive than recognition, but it starts you on fresh ground.
If the underlying contract contained an arbitration clause and the dispute was resolved through international arbitration, confirmation under the New York Convention is usually the cleanest route. Federal courts have jurisdiction over actions to confirm Convention awards regardless of the amount in dispute, so the $75,000 diversity threshold doesn’t apply. The court must confirm the award unless the opposing party proves narrow grounds for refusal, such as lack of proper notice, the panel exceeding its authority, or an award that violates U.S. public policy. The petition must be filed within three years of when the award was made.2Office of the Law Revision Counsel. 9 USC Chapter 2 – Convention on the Recognition and Enforcement of Foreign Arbitral Awards Because the defenses are so narrow, arbitration awards tend to move faster and more predictably than foreign court judgments.
Grounds a U.S. Court Will Use to Refuse a Foreign Judgment
A U.S. court must refuse to recognize a foreign judgment if the foreign court system doesn’t provide impartial tribunals or basic procedural fairness, if the foreign court lacked personal jurisdiction over the debtor, or if the foreign court lacked subject matter jurisdiction over the dispute.3Maine State Legislature. Uniform Foreign-Country Money Judgments Recognition Act Any one of those is enough to kill the case.
Courts also have discretion to refuse recognition for other reasons: fraud in the foreign proceedings, a judgment that conflicts with another valid judgment, a proceeding that violated the parties’ agreement to resolve disputes elsewhere, or a result that offends U.S. public policy. Punitive damages are the classic public policy flashpoint. If a foreign judgment includes punitive damages of a kind the enforcing state doesn’t recognize, a U.S. court may refuse to enforce that portion. German and Japanese courts, among others, have refused to enforce American punitive damage awards on the same reasoning.4U.S. Department of State. Note on the Recognition and Enforcement of Decisions in the Perspective of a Double Convention With Special Regard to Foreign Judgments Awarding Punitive or Excessive Damages
A few states still ask whether the creditor’s home country would give the same effect to a U.S. judgment, a reciprocity requirement that traces back to the Supreme Court’s 1895 decision in Hilton v. Guyot.5Justia U.S. Supreme Court. Hilton v Guyot, 159 US 113 (1895) Most states that adopted the uniform acts have dropped it, but creditors from countries that routinely ignore U.S. judgments can run into trouble in the holdouts.
Under the 2005 uniform act, a creditor must seek recognition before the earlier of two deadlines: the date the judgment is no longer enforceable in the country of origin, or 15 years from when the judgment took effect there.
Which U.S. Court Can Hear the Case
Before any of the three paths opens, a U.S. court needs a legal basis to hear the matter. That means personal jurisdiction over the debtor and subject matter jurisdiction over the dispute.
Personal jurisdiction turns on the debtor’s connection to the state where you file. If the debtor lives there, the question is easy. If not, the debtor must have “purposefully availed” themselves of the privilege of doing business in that state, the standard set by the Supreme Court in International Shoe Co. v. Washington.6Cornell Law Institute. Minimum Contact Requirements for Personal Jurisdiction A debtor with no ties to the forum state generally cannot be pulled into its courts.
Subject matter jurisdiction decides state court versus federal court. Federal courts can hear cases between a U.S. citizen and a foreign citizen when the amount in controversy exceeds $75,000, a category called diversity jurisdiction.7Office of the Law Revision Counsel. 28 USC 1332 – Diversity of Citizenship; Amount in Controversy; Costs Below that number, state court is the venue, and state procedures vary enough that the choice of forum often shapes the whole strategy.
If you file an original lawsuit and need to serve the debtor across borders, service runs through the Hague Service Convention. Each of the 84 contracting countries designates a Central Authority to receive requests, and the process typically takes months. Paperwork errors can void the service entirely, so this step rewards care.8Department of State. Service of Process
How Long You Have to Act
Every debt has a clock. Once the statute of limitations expires, the creditor loses the right to sue even on a legitimate debt. The limitation period depends on which state’s law applies and what type of debt is involved. Written contracts generally have longer windows than oral ones, with written-contract periods across the states ranging from three to ten years and most falling between four and six.
The clock can pause. If the debtor leaves the state or conceals their location, many states toll the limitation period until the debtor can be found. In some states, a partial payment or a written acknowledgment of the debt restarts the clock from zero.9Consumer Financial Protection Bureau. Can Debt Collectors Collect a Debt Thats Several Years Old?
Foreign creditors face an added wrinkle: borrowing statutes. Many states let courts apply the shorter limitation period from whichever jurisdiction the debt originated in. If a creditor let the claim expire where it arose, a U.S. court will not revive it just because the American limitation window is longer. Check both deadlines before investing in enforcement. The shorter one may control.
When a debtor actively conceals the debt through fraud, courts have historically applied a discovery rule under which the limitation period doesn’t begin running until the creditor discovers, or reasonably should have discovered, the fraud. The Supreme Court acknowledged the principle in Rotkiske v. Klemm, describing the rule as a safeguard against the statute of limitations becoming “an instrument to encourage fraud.”10Supreme Court of the United States. Rotkiske v Klemm Whether the exception is available depends on the specific statute and jurisdiction.
Collecting Once You Have a Judgment
A U.S. judgment, however obtained, doesn’t collect itself. The creditor must find the debtor’s assets and use legal tools to reach them.
Finding the Assets
Post-judgment discovery lets creditors force the debtor to disclose their financial situation. The tools include subpoenas for bank records, orders requiring the debtor to appear and answer questions under oath about assets, and demands for documents showing income, property ownership, and account balances. This is often where foreign creditors learn that the debtor has less than expected, or that assets are titled in ways that complicate seizure.
Garnishment, Levies, and Liens
Wage garnishment directs the debtor’s employer to send a portion of each paycheck to the creditor. Federal law caps the amount at the lesser of 25% of disposable earnings or the amount by which weekly earnings exceed 30 times the federal minimum wage of $7.25 per hour.11Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment12U.S. Department of Labor. State Minimum Wage Laws At that minimum wage, weekly earnings up to $217.50 are fully protected. Some states cap garnishment more tightly still.
Bank account levies let creditors seize funds directly. A court order goes to the sheriff or marshal, who serves it on the bank, which freezes the account and turns over non-exempt funds. Real property liens are another option: the judgment is recorded against the debtor’s real estate, forcing a sale or ensuring payment when the property eventually changes hands.
Exemptions That Protect the Debtor
Federal law shields certain property from seizure, and most states substitute their own exemption schedules. Protected categories under the federal schedule include home equity, one motor vehicle, household goods, tools of the trade, and retirement accounts, with retirement protection running up to $1,711,975 in IRAs and no cap on employer-sponsored plans like 401(k)s.13Office of the Law Revision Counsel. 11 USC 522 – Exemptions State exemptions can be dramatically more generous. In states with an unlimited homestead exemption, a debtor can shield an entire home from creditors. Pull the applicable state’s exemption rules before spending money on enforcement.
Rules That Catch Foreign Creditors Off Guard
The Fair Debt Collection Practices Act
A foreign creditor who hires a U.S.-based collection agency or attorney to collect consumer debts has to make sure that agent complies with the Fair Debt Collection Practices Act. The FDCPA covers anyone whose principal business is collecting debts owed to another, or who regularly collects for others, so the U.S. collection agent is squarely in scope even though the creditor is overseas.14Federal Trade Commission. Fair Debt Collection Practices Act Text
The Act restricts how, when, and where collectors can contact debtors. Calls before 8 a.m. or after 9 p.m. are prohibited. Collectors cannot threaten violence, use obscene language, or misrepresent the amount owed. A written validation notice must go out within five days of first contact, listing the amount of the debt, the creditor’s name, and the debtor’s right to dispute. Violations expose the collector, and potentially the foreign creditor directing the work, to statutory damages of up to $1,000 per lawsuit, plus actual damages and attorney fees.
The FDCPA generally doesn’t apply to original creditors collecting their own debts. But a foreign creditor who collects under a different business name that makes it look like a third-party collector is involved can end up covered. Commercial debts between businesses are not covered at all; the Act protects obligations incurred primarily for personal, family, or household purposes.
30% Federal Tax Withholding
This is the issue foreign creditors most often miss. When a U.S. person pays interest or certain other income to a foreign person, the payer must generally withhold 30% of the payment for federal taxes. If recovered funds include an interest component or penalties, that 30% default rate applies unless a tax treaty between the creditor’s country and the United States reduces it.15Internal Revenue Service. Publication 515 (2026), Withholding of Tax on Nonresident Aliens and Foreign Entities
Interest that qualifies as “portfolio interest,” broadly meaning interest on debt obligations not connected to a U.S. business, is exempt. Whether recovered funds qualify depends on the nature of the underlying obligation and the creditor’s relationship to the U.S.
The entity making the payment, or the collection agent acting as withholding agent, must file Form 1042-S reporting the amounts paid and any tax withheld, along with Form 1042 as the annual withholding tax return. For 2026 payments, these forms are due March 15, 2027. Late filing penalties start at $60 per form and escalate to $340 per form if filed after August 1 or filed incorrectly.16Internal Revenue Service. Instructions for Form 1042-S Talk to a U.S. tax professional about withholding before collection begins, not after funds have been distributed.
What Debtors Will Argue
The most effective defense is challenging jurisdiction. If the debtor can show the U.S. court lacks personal jurisdiction, the case gets dismissed regardless of the merits, and debtors with thin ties to the forum state raise this first.
In recognition cases, debtors attack the foreign judgment directly. They argue the foreign court lacked jurisdiction, that notice was improper, or that the foreign court system doesn’t meet basic due process standards. Because these are mandatory grounds for non-recognition, the burden effectively lands on the creditor to show the foreign proceedings were fair.3Maine State Legislature. Uniform Foreign-Country Money Judgments Recognition Act
Public policy defenses surface when the foreign judgment includes elements U.S. law wouldn’t support, with excessive punitive damages the usual target. Statute of limitations defenses are also common, especially where the creditor waited years before pursuing U.S. enforcement.
Currency and Cost
When the debt was incurred in a foreign currency, the conversion rule matters. About half the states have adopted the Uniform Foreign-Money Claims Act, which lets courts state judgments in the foreign currency; the debtor then pays in U.S. dollars at the exchange rate on the banking day before payment, protecting the creditor from currency drift between judgment and payment. In states without the uniform act, courts typically apply either the “breach day” rule (converting at the exchange rate when the debt was incurred) or the “judgment day” rule (converting at the rate when the court enters judgment). With volatile currencies, the difference can be substantial.
Costs add up. Court filing fees for domesticating a foreign judgment generally run between $45 and $360 depending on the jurisdiction and the size of the claim. Many international collection attorneys work on contingency, taking 25% to 50% of recoveries, with the percentage climbing for older or more difficult debts. Hourly rates in major U.S. cities can exceed $500 for complex cases. Translation and authentication of foreign documents, process server fees, sheriff’s fees for executing levies, and expert witness fees in trials all pile on. For smaller debts, the math often doesn’t work, which is why foreign debt collection in the U.S. tends to involve commercial claims rather than small consumer obligations.