Way too often, I run into a client who asks whether a Legal Permanent Resident is allowed to file for bankruptcy and more importantly, whether doing so would carry negative consequences for their potential bid for the US Citizenship through Naturalization process. This question comes from a common and widespread misconception, which is addressed in this article.
One would be hard-pressed finding any direct reference to bankruptcy in our statutory and regulatory immigration system. There is simply neither a law nor regulation that directly forbids filing bankruptcy by a noncitizen, or views it as an immigration violation. Unless an LPR has failed to pay taxes, which is directly addressed in Part 1- Section A, questions 4 and 5 of the N-400 Naturalization Application, at which point it would be a problem, bankruptcy simply does not come up in any of the statutory text of the INA, nor it's implementing regulations in the context of the naturalization or citizenship. The only context in which it does come up is employer suctions. OCARO (Federal Agency adjudicating employers' compliance) takes the position that sanctions hearings fall under an exception to the automatic stay provision in bankruptcy. The Agency construes 11 U.S.C.· §362(a) to permit the enforcement of its regulatory and police authority in collecting against the employer when sanctions are imposed.
THE REAL QUESTION
So, the real question is whether bankruptcy can indeed play a role in adjudicating naturalization applications. It is unclear whether the Agency can take the fact of bankruptcy into account when doing so. USCIS is not particularly helpful on the issue as it has produced no policy guidance on the subject. Hence, the answer to this question is not very apparent and requires some analysis. INA §. 324(b) imposes upon an applicant for naturalization a requirement to prove good moral character during the last five years immediately preceding his or her application for naturalization. The implementing regulations empower USCIS to look beyond the five years, if anything in the applicant's record opens the door for further inquiry. This inquiry extends forward to the point in time when the applicant is naturalized and can go back for as far as the Agency would like it to go, if the record of the last five years does indeed warrant further inquiry.
USCIS makes good moral character considerations on a case by cases basis. This evaluation is committed to the broad Agency's discretion. In adjudicating this issue the Agency takes into account the immigration laws in effect at the time of the adjudication, while looking at the facts from the standpoint of an average citizen in the community of the LRP's residence. 8 C.F.R. § 316.10(a)(2). When viewed from this standpoint some acts including for example, willful failure or outright refusal to pay child support, are considered by the Agency as evidences of poor moral character. 8 C.F.R. § 316.10(b)(3). Hence, depending on the circumstances the case, the Agency, in the exercise of its broad discretionary powers, may deem filing for bankruptcy as evidencing poor moral character. In other words, there could be circumstances, when the applicant's actions and financial decisions leading up to bankruptcy, may be consider so improper, negligent or even reckless as to suggest intent to defraud, foul play or outright fraud.