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Legal Domestication of Foreign Debts

foreign debt domestication

Domestication of a debt refers to the process of getting a California court to recognize and enforce an out-of-state judgment or sister-state judgment or a judgement from a foreign country. Domesticating foreign debts are handled differently than domesticating out of state or sister-state judgments. Unfortunately, the United States has no reciprocal treaty with any country requiring that it recognize judgments rendered abroad, so Californians must rely on the Uniform Foreign Money Judgments Recognition Act (UFMJRA), codified in California beginning at Civil Code section 1713. Foreign country money judgments will be enforceable in California if all of the following requirements are met:

  • Individual seeking to enforce a judgment must bring an action in California to establish a domestic judgment.

  • The judgment seeking to be enforced is final, conclusive and enforceable where rendered (even if an appeal if pending). Note that a judgment is not “conclusive” if it was rendered under a system which does not provide impartial tribunals or afford due process of law.

  • The foreign court had personal jurisdiction over the defendants or subject matter jurisdiction over the matter.

Generally the process involves the creditor asking the court to enter a judgment in California based upon the judgment that was entered in the foreign country. The debtor has two choices; he can decide not to respond at all, or he may challenge the judgment on due process grounds.

California courts have broad discretion on whether to grant or deny enforcement of such foreign judgments. Even if the foreign judgment meets the above requirements, the California court can deny enforcement and refuse to recognize the judgment if

(1) the defendants did not have adequate notice of the original proceeding
(2) the judgment was obtained by fraud
(3) the judgment violates public policy
(4) the judgment conflicts with another conclusive judgment
(5) the judgment was obtained in violation of an agreement between the parties, OR
(6) the foreign court was such an inconvenient forum that due process is offended.

Note that the action to obtain the judgment must be commenced within four years from the date that the foreign country judgment is entered. In addition, the judgment, once registered in California, accrues interest at 10% per annum.

There are many complex steps to completing the legal domestication of foreign debts. To discuss the process and all of your legal options, make an appointment with Andrew Ritholz, an experienced debt domestication attorney.

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