 In August 2007, there were reports in the Honduran press that Palacios had gone missing, until his father stated that his son was actually in London having a trial with Premier League club Arsenal.On 24 August 2007, Birmingham City announced that after a recommendation from Arsenal manager Arsène Wenger they were offering Palacios a trial with a view to a six-month loan, which was agreed on 31 August 2007.He made his debut for Birmingham against Liverpool at Anfield in a 0–0 draw on 22 September.