A US citizen defaults on their credit cards. Eventually the creditors
may seek and win a judgement against this person. In such a case,
personal bank accounts will be seized by the creditors. Will funds
held in a US PayPal account also be seized or will these funds remain
out of reach of the creditors? What if they are held in a foreign
PayPal account?

If the creditors manage to release funds from an bankrupt individual's
personal account via a court judgement, they are able to release all
forms of assets from that individual's estate including any personal
property and bank accounts.  This includes paypal accounts in any
country.

Interesting... PayPal is FDIC insured.  That means that PayPal is
considered to be a financial institution (Loblaws Grocery Amicus Bank
Canadian International Bank of Commerce CIBC PC President's Choice
financial is CDIC insured here in Canada - that means that they are a
bank) - Just like PayPal.

P.S. - Have a friend open an account in Canada at TD Canada Trust or
HSBC Bank Canadain trust with an Interac debit card in trust for you -
then the funds are safe.

Thanks guys. I would agree that most likely they can seize a PayPal
account too. Although, if the account is overseas, I'm less sure. They
can't seize assets held outside the US unless you are a true criminal
as far as I know. But maybe a PayPal balance is considered within US
jurisdiction no matter where you signed up.

Are you sure about the Canadian bank? Could the debit card be in my name?

I'm not sure what makes you think overseas assets are protected in any
way.  If that were the case, a bankrupt individual would just transfer
any cash balances straight to an overseas account to protect them.

Trust banks are an interesting case because if the assets are held in
trust, the legal ownership will no longer lie with the bankrupt
individual so there could be scope for bankruptcy protection.

Firstly, I would have serious questions as to the jurisdiction of US
courts over foreign banks and countries when no crime has been
commited. Do you know as an absolute fact that creditors could seize
say a house in Cambodia that belongs to a US citizen simply because he
defaulted on his credit cards? To even attempt to do that would mean
huge sums of money spent on the creditors behalf and the entire
attempt would be extemely complicated as the US creditors try to
reason with the Cambodian court system.

Secondly, to seize an account or other assets, the creditors must know
it exists. Are we to believe that the collection agencies will search
the globe, contacting every bank in every country requesting account
information that to my knowledge, the banks will absolutley not turn
over unless a serious crime has been commited?