Many people have emailed me asking if they could go to prison for not paying their credit card debt. It seems that some collection agencies are trying to intimidate debtors with the threat of arrest and imprisonment. A collection agency representative might comment “if you don’t start making payments on this we can take you to court and put you in jail.” There’s a lot of information on this subject and I will attempt to organize it in an intelligent manner. The correct answer to this question is - it depends! See also, DebtPrison related article Can you leave the U.S. to avoid paying your debts.
**Disclaimer – Debtprison.net does not administer legal or financial advice. The contents of this website are my opinions on collection agencies and how to deal with them. Nothing on this website should be interpreted as legal advice or council. No opinions on this website should be used to replace the advice of your financial advisor or your legal council.
See also all of my articles on Collection Agencies.
See also DebtPrison related article How to deal with Collection Agencies.
Failing to make payments on debt is not considered a crime in the United States. The U.S. hasn’t utilized a debtor’s prison since the 1850’s. Some countries will still place a debtor in prison for failing to make payments. However, the U.S. government has a vested interest in making debt a desirable circumstance, therefore debt is not criminalized. In order to go to prison you must be convicted of criminal behavior. Laws regarding these issues will vary state to state. See also DebtPrison related article How to settle your debts on your own.
Here are your options with debt you’re defaulting on:
1. Settle your debt (but you’ll need some cash).
2. File bankruptcy (an often nightmare).
3. Ignore it and possibly go to jail for contempt of a court order (very rare).
4. Start paying it back in full.
What will most likely happen
It’s always been my understanding that your creditor can take you to civil court and obtain a judgment against you saying that you owe the debt. Through the judgment the collector can then garnish your wages or even get liens against your assets. But getting to this point of wage garnishment or liens against assets is time consuming and usually never occurs. That’s because the collector has to go through a process that I’ll explain later in the article.
Going to jail for contempt wasn’t something that I thought could occur, but then I’ve read some comments from my readers below. I’m assuming there’s more to the cases than just the average default. It seems that in some rare cases an arrest warrant can be issued for contempt of court. I think this is somehow related to your not showing up in court, but from what I’ve read these arrest warrants are very uncommon.
This was stated by Sherri below in the comments “They tried to take me to court in 2000 ish. I tried to set up a payment plan and the guy told me he would not allow a payment plan and wanted me to ask friends and family to pay the bill. This week I got a letter in from the sheriffs dept stating it was a warrant for arrest. The attached paperwork was showing a court date for 12/20/07. In which I NEVER received any paperwork stating I had a court date in Dec.”
And this was stated by Deb “I owe around 3,000 in credit debt, and a sheriff keeps banging on my door leaving me a note from the sheriffs dept, what the hell is this all about? And can they arrest me in my own home?”
I have no way of knowing specifically what occurred in the two above mentioned cases that led to the Sheriff’s Dept. getting involved. In general, the negative outcomes (negative credit reporting, wage garnishment, liens, or jail) often depends on the amount of money involved and the aggressiveness of the creditor. The more money involved (almost always in excess of $1,000) the more likely the creditor or collection agency will pursue legal action.
Usually the process follows these guidelines:
You have defaulted on your payments. Your creditors collection division calls you daily to try and talk you into making a payment. After a year or two they give up on the phone calls and letters. They can’t get you to pay so they (this could now be a collection agency, not the original creditor) sue you in civil court. This can happen even if you are in a debt settlement program. It’s a lot of trouble and expense for them to sue you, so normally they won’t bother unless they figure they can get some money out of you.
Keep in mind that there are rules that collection agencies must follow according to the Fair Debt Collection Practices Act. If they don’t follow the rules you can actually hire an attorney and file suit against them! For example, if they have your phone number, they are not allowed to call your family, friends, or employer (if you request them not to). Also, you can write a cease and desist letter which instructs them to only communicate with you via U.S. snail mail.
Scenario 1 – You don’t show up and the judge rules in favor of the creditor and against you. This judgment is an acknowledgement that you owe the money. I’ve read that 80% to 90% of judgments are never collected! This is because the judgment is usually just an acknowledgement that you owe the money, and that is all. In order to collect another court date must be assigned to perform a ‘writ of execution’. If they summons you for this, and you don’t appear, they may issue a bench warrant for your arrest.
A writ of execution is a common court order granted by a court in an attempt to satisfy a judgment obtained by a plaintiff. When issuing a writ of execution, a court typically will order a sheriff or other similar official to levy property owned by a judgment debtor. Such property will often then be sold in a sheriff’s sale, and the proceeds remunerated to the plaintiff in partial or full satisfaction of the judgment. It is generally considered preferable for the sheriff simply to confiscate money from the defendant’s bank account. If the judgment debtor owns real property, the judgment creditor can record the execution to “freeze” the title until the execution is satisfied.
If you don’t show up for this one you may be arrested for contempt of court. This is the part of the process where the facts will be laid out. This is the part where they get your employment information for wage garnishment or asset info for liens. But bear in mind, most collections will not get to this point. It really just depends on how aggressive they are on your particular case. And many people are actually in a position where they cannot be collected on. Perhaps you are disabled and on limited income. Chances are they can get a judgment but will never be able to collect. There is also a federal minimum (I think this figure is 30 hours of minimum wage pay per week), which if you make below, they cannot collect. For example, if minimum wage is $5.80 per hour, times 30 hours, comes to $174/week or $702 per month. If you make that or less they cannot touch you. Money that is in IRA’s, custodial accounts, trusts, annuities, and insurance contracts are often untouchable. See also, Restrictions on Wage Garnishment for Debt Collection.
Scenario 2 – You go to defend yourself against the creditor. You explain why you do not owe the money. Or you explain that you owe the money and cannot pay it because of personal circumstances. The judge may or may not rule in favor of the creditor. If you don’t owe the money or really can’t pay – just walk into court and defend yourself, you’ll be glad you did.
Please understand that the garnishment of wages depends on many factors such as: your level of income, possibly your spouses income may be considered, and the number of dependents you have. To read about someone’s personal experience in using debt settlement companies read Tell Debt Settlement Companies to Kiss Your Ass. If this article doesn’t convince you to stay away from these companies, I don’t know what will.
Can you be arrested at airport returning to U.S.?
I’ve seen this question come up quite often. Some people moved away from the United States into another country. However, they left behind tens (or hundreds) of thousands of dollars of debt. Now they need to re-enter the U.S. for a vacation or to visit family. They are worried about an outstanding arrest warrant related to the debt. If you are concerned about this possibility try performing an information search on yourself at a site like this one. Perhaps avoiding entering the state where you used to live would be a good idea. Now if you have a warrant for fraud (related to your debt) the possibility for arrest may carry a bit more weight since this is a criminal, not civil arrest warrant. Keep reading to learn more about fraud and other issues related to debt and jail. See also, DebtPrison related article Can you leave the U.S. to avoid paying your debt.
Fraud
Also, if you obtained debt by committing fraud you can go to jail. For example, let’s say you just moved into a new apartment. Mail for the previous tenant is still arriving at your apartment. A credit card offer comes in the mail for the previous tenant. You fill out the application, mail it in, and start using this new credit card which is in someone else’s name. This is fraud and if convicted you could serve time in prison. This happened to my cousin. He moved out of his apartment and the following tenant received his mail and ran up thousands of dollars in retail charges. He had to get a lawyer involved and it took years to get this completely removed from his credit report.
Perhaps you have ‘borrowed’ your sister’s credit card to go out and spend a couple of grand without her knowing about it. In this case you could be fined and or imprisoned for fraud. This type of conduct is also considered criminal in nature.
You could possibly be looking at prison if you ran up thousands of dollars of debt on credit cards with no intention of paying it back. Recently the federal government changed the law regarding filing bankruptcy on credit card debt. The new law makes it harder to erase the debts you owe to credit card companies. Before this law went into effect, bankruptcy courts received a record number of new filings. Broke Americans were all trying to file for bankruptcy before the new law kicked in.
At the time I had an acquaintance that had in fact, filed bankruptcy on debts to various creditors, worth over $60,000. We were discussing the new law and he suggested that I run up tens of thousands of dollars in credit card debt. When the bills came due I would simply file bankruptcy before the new law took effect. Many people did exactly that. If the credit card company can prove that this was your intention, then some judges would find you guilty of fraud – taking out loans that you had no intention of repaying. However, it is usually difficult to prove that someone had no intention of repaying the debt. For example, if you applied for six credit cards, maxed out the limits for a total of $15,000, and then never made a payment, you could be in serious trouble. It would be obvious that your intent was criminal.
In general if it can be proved you received money or goods by deceptive practices you may be eligible for a criminal conviction.
You could also be imprisoned for the following:
If you violate a court order (a judgment against you to pay child support).
If you are convicted of willfully failing to pay your income tax to the government.
If you are attempting to hide assets or income to avoid paying a debt for which there is a judgment against you.
Bankruptcy related acts that can result in criminal penalties include:
If you defraud tenants
If you forge a bankruptcy judges signature
If you commit perjury during the creditor’s meeting
Keep in mind that there is a difference in a judgment (civil court decision about money you owe another party), and a verdict (criminal court conviction of a crime). In a civil court case the outcome will largely depend on the judge and his interpretation of the circumstances.
Simply defaulting on your debt is not a crime
If failing to pay your debts equaled prison time then half the people you know would be in jail. Even the author of this article, although my debt is caught up now and will be soon be paid off in full. Many people have lost their jobs or had unexpected medical issues force serious changes to their financial lifestyle. Through no fault of their own a debtor may no longer be able to make the minimum payments. This is not a crime and one cannot go to jail for these reasons. Like I said earlier, collection agencies will do anything they can to convince you to send them a payment. If you have credit card debts or medical bills that you can no longer pay, you can’t go to jail. This is why we have debt settlement, bankruptcy, and ruined credit scores.
Although you can’t go to jail for failing to pay your debts, there is a list of negative consequences you may be eligible for;
Collection Agencies can call your phone several times a day.
They can even call your place of employment, asking for you or where they can find you.
They can call your neighbors and ask them if they know where you are.
They can sue you in civil court for the balance of debt you owe them.
They can win a judgment in civil court against you for the debt owed.
Through the judgment they can garnish wages from your paycheck.
Through the judgment they can garnish your banking accounts.
They can (in some states) get a lien against your assets (house) and sell it to pay off the debt.
They can report the collection information to credit bureaus which lowers one’s credit score.
So the short answer is no – you can’t go to jail for simply not paying your debts, unless you are in contempt of court (very rare). But, creditors and collection agencies can make your life a living hell. So it’s in your best interest to get this situation handled in a manner that benefits you.
Remember that some debt collectors will scare you anyway they can to force you to pay up. The best advice I can give is to educate yourself about your options. Take the time to read information across the web about debt and collection. There are a lot of articles out there – most of them are accurate and truthful. Please feel free to leave questions or testimonials at the forum. Go forth and be debt free!
Discuss this article, share ideas, and meet new people at Debt Prison Forums.
Related Articles
* Restrictions on Wage Garnishment for Debt Collection
* The Fair Debt Collection Practices Act
* Get Everything in Writing: Collection Agencies and Their Lies
* Reasons not to file Bankruptcy or Settle Your Debts
* Can you go to jail for not paying your debts?
* How to settle your debts on your own
* How to deal with collection agencies
* Sample Debt Validation Letter
* Will Debt Follow You Abroad?
* Information on Credit Card Balance Transfers
* How I Escaped Credit Card Debt
Your creditors can take you to court and get a lien against your home and any other assets you have if you cannot pay them. I’d sell the house, pay my debts, and start over. Your other option is to deal with these creditors one by one. If you go that road I must go ahead and recommend you hire a lawyer to act/negotiate on your behalf. With the amount of debt you have, combined with a home which has considerable equity…. if you want to remain in the home… seek legal advice and let your lawyer walk you through the settlement process.
I love my house. I ran up debt renovating it. I want to keep it.
Hey Jenni,
Sell your house and pay off your debts.
I owe about $100,000 in credit card debt. I haven’t paid many cards since August 09. I have a house that is worth lots of money. Creditors call every day. I don’t want to file for bankruptcy because they will take my house. Got into this situation due to the failed real estate market. Properties didn’t sell that would have paid these bills. Because I owe so much, will they take me to court? I have gotten several notices of settlements which have reduced what I owe to some creditors by more than half but I don’t have to money to pay the settlement amounts. What should I do? Is there some company that will consolidate my debt and make one payment that I can afford?
Steve,
Depending on the state you live in, typically you can only have 25% of your disposable income garnished. Taxes first, then child support, finally vendors. Chances are they won’t be able to take anything more out of your check because of your child support. Good Luck.
You need to gather all of your paperwork and go and sit down with a lawyer so you can sort through this. You need to come up with some money for this legal advice, which may end up saving you money.
need help on a old morage. was married had purchased home through FHA, seven months into home we split, company contacted me about purchasing home, thought I sod it to Sothern Investments, but they did not tranfer the title. In 2000 the Goverment started taking money from me saying the house went into forclosure and I owed 38,000. They have taken so far almost 20,000. They now want the rest or they are going to garnish my Pay. Any one out there that can help? I do not have the money for a lawyer, I feel I am dumb and now I am going to be so broke.
Hey Steve,
They always do this, nothing new. Pay if you can and if not just tell them. If they keep making ‘demands’ just hang up… they’ll back tomorrow.
About a year ago I went through a divorce and lost my job (yeah double hit) I had 2 cards with 3000 a piece on the balances 6000 total. I wasnt able to make payments and have recently found a job, its been a year now and suddenly Im getting calls from the creditors they sold the debt to. Worst case scenerio can they really force you to pay the balance back even when you are only working a part time job, my income barely covers living and child support expense, Ive told the creditor I will make payments once my job goes full time but they demand money now, how can they get blood from a turnip?
AG,
They are coming back to collect the debt. We don’t know if it will be the CC company (via a hired lawyer) or if they will sell the account to a collection agency. If they keep the account and sue you, they may or may not settle. They may opt for a judgment against you in court. If it is sold to a collection agency, I’d offer 25%.
http://debtprison.net/wordpress/170/collection-agencies-get-everything-in-writing/
OK, question. I owe over 20k on 1 credit card. I stopped paying on this card around April of 09, after not being able to make the monthly payment and after they raised my % rate when I HADN”T missed a payment. I’m never late on anything else, (Car, Mortg, other CC all paid on time) A few months back I received a collection notice from a Lawyers office in Mass (I’m in GA), Stating that If I do not agree with the amount owed to write back in. I sent them a basic letter stating that no i didn’t feel I owed the total amount. I never heard anything back from them, nor have I heard from the CC company. First part do you think at some point they will continue to collect, if so in what time frame. Again I owed about 23k, if they do come back what do you think would be the lowest amount they would take as a settlement? What I’m doing now is saving up money to pay when they come back. Second thing is if I do settle at what point will that come off my credit report and how much do those letters help (letter stating this debt has been paid) when applying for other credit(mortgage, car)?
Thanks
Hey Bule,
I’d go to court and at least explain to the judge why you haven’t made payments. You’ll get a judgment placed against you whether or not you go. But you need to go so you’ll be more aware of what is going on. Also, if the bill collector tries to continue to add monthly interest to the dollar amount they claim you owe, ask the judge to please not allow that. And that you will make payments on this debt when you can, but at the time you have no money, assets, or a job.
Hey Anita,
I’d stop going to school and pay off these debts first. It’ll put you a year behind but it will clear things up. Yes they will harass anyone on the contract, so if your dad was a co-signer then they consider him the responsible party. If you make no payments then this will ruin your fathers credit if he doesn’t make payments. It will likely be a year or more before it goes to civil court.
I have never heard of anyone being stopped by immigration because of old debts in the U.S. they did not pay.
I have a question to ask,
I recently just got sued today by a collection agency and my friend who lives with me gave me the court date notice. He said a guy with a sheriff badge in his chest gave it to him when i was not home. The notice said I owe a total of $2671 dollars. I dont deny the debt, I do owe them money but I just dont have any right now. what will happen if I were to show up or not show up on the court date? could I get arrested and put in jail if I were not to show up? I’ve been out of work for more than 2 years and I just dont have any money to pay.I was in school and i just got done with my associate degree. I dont have a bank account either and also no house, car or other valuables except for an old computer that prolly only worth less than 100 dollars..I just wanted to know what will happen on the court day. Should I call the law office that filed the suit and tell them I dont have any income?will they drop the suit then? Please help
Thank you so much , so much to whomever put this information out here. Where do I begin. I went to a lawyer to file bankruptcy a year ago, I was told I make “to much money” to file a 13 and would have to do a “repayment” plan but for only 5% of what I owed. Plus I was told I could “cram down” what I owed on my vehicle as well. To make a very long story short. I stopped paying the credit card companies a year ago. I saved and saved to pay the attorney around three grand and that took a year not to mention that my outstanding debt accumulated another almost twenty grand in interest and fees. Now I am not filing and am trying to negotiate with each creditor to pay back a portion of the debt by settling with each one. A painful but necessary process. My attorney knew how much I made, what my debt was and I was not told all the options that I could pursue or what would ultimately be in my best interests so he got his money and I am another one third extra in debt and make even less money now (in sales). Bankruptcy is still an option but have I learned the long and hard way.
I now have read nearly all your articles concerning me and my debt. I have (or at least had before I stopped making payments) $15,000 in debt. That is (was) $7,500 on one credit card and $7,500 loan. I was making payments until June 2009, but then lost my job and stopped making payments to both. In August my dad (cosigner to the loan) was getting harassing calls from the bank to make a payment ASAP. Since I knew it was not my dad’s responsibility, I called the bank and started making payments with them again. However, as I am a student and barely have money for normal expenses (let alone my loan payments) I haven’t made cc payment since June. I am residing in Canada and am afraid of what can come of my cc debt. I am a citizen of both countries. What would come of if I still don’t make payments to my credit card? I still have bank accounts open in the US but never use them. I travel frequently down there to visit my family. If they are not able to find me (present a summons), will my case still be taken to court? Will my family get phone calls? My hopes are to finish school, but if I have to pay towards my cc debt (especially in a lump sum of what I’ve missed these past 6 months), I’m afraid I won’t make tuition.
Do you have any advice? Should I worry when I drive across the border? How long typically does it take before they send the issue to a civil court?
I know it is my responsibility, but it just not possible at this time. If I could go back and never get a credit card, I would. But now I’m trying to look forward and don’t know how. Help please!
Thanks for your time!
Ryan,
Communicate with your student loan companies immediately (they don’t bite). I’m in a similar situation as you. They have a program for economic hardship deferment where they can give you a year or more of a break from paying your student loans. It would also help if you could consolidate your student loans in to a Federal consolidation program. If you have received an economic hardship deferment from one program typically you can convince other programs to follow their example (in the case you have student loans from multiple lenders).
Ask your credit card company to put you on a payment program. Be sure that the program does NOT include having them close your credit line. This is negatively effect your credit. Most payment plans include a lower APR and no penalties. They may even go back six months and reverse penalties you have already suffered.
Remember, student loans do not directly affect your credit but your credit cards DO! So pay credit cards before student loans. If you are able to get on deferment and on payment plans you should have lowered your total monthly bill CONSIDERABLY.
At this point you should be feeling a lot better. Use the time to just relax and think about your next step. Pay down principal on your credit cards with the highest APRs and work your way down.
Hope this helped…
Hey Ryan,
Just stay at your parents house. You need this break from bills to get your finances in order. If you don’t get the stuff on track it’ll haunt everything else you try and do in the future.
Well rest assured there are many people in your situation. There’s most likely nothing, for now, that you can do about the student loan debt. Toss it up as lessons learned. What you can do is get pro-active. Get a job, any job, and get your mind busy. Work hard and exercise, go jogging in the morning or evenings, work out, and get busy. This will help with your depression and also give your mind a break from worrying about this debt. I’d focus on this credit card debt for now. If you live with your parents, then put all of your money each month towards your cc debt. Get rid of that junk first. Pay the smallest one first and move up to the next biggest.
The student loan debt, like my own, is one of those things in life you’ll be paying for, for many years (decades?) to come. Either way there’s not much they can do with you if your broke and living at home with parents. But I’d talk with them, on the days when my nerve was up, and try and keep them from adding any unnecessary fees or interest. Keep the lines of communication open when you feel like you can handle the converstation. But in time, you’ll be able to pay down on this student loan debt.
For now, get out, get any job, get some exercise, take a multi-vitamin. And make sure you are getting enough sleep each night. Just get up and do it.
Debt prison (sorry thought your name was charles embarassing)
I have a pretty intense situation for you. I graduated from colllege and have a ton of student loan debt. estimated 80k and I have 15k more in credit card debt. I have always paid minimums on my cc bills and on a few of my loans was paying intrest only on my student loan bills while they were in their grace period. I since lost my job my family had been helping pay the minimums on the cc bills but there is just no way I can begin to handle the student loan debt. I feel terible even having family help with the cc minimum payments and even that wont last for long. The stress of the phone calls has put me inot a depressionand I think about the huge mountain of debt I have to overcome to even really begin my life. I am 26 stil at the parents house. I have 11 dollars to my name. What can I do to get some grip on this situation? the cc bills are all 30 percent cause they were maxed and student loans are mostly 9-10 percent. please offer some advice
Hey Charles,
Well they can get a judgment against you. But, go to court and if it’s a collection agency, instead of the original creditor, then demand to see the original contract with your signature.
There’s a decent chance they won’t sue because this is such a small amount. If they get a judgment against you, nothing they can do until you get a job. Then you can just call them and work out a payment plan or try and do a lump sum settlement for like $300. They might take it.
I am pretty much in this situation. I owe the credit card company some $643.44. I currently have no job and havent had a stable enough job for the past 7 to 8 months to pay for this debt. I have no money in my bank account for them to take out and i dont have any assests for them to take since I really dont have a stable place to live.
what would be my outcome? I already know that I wont go to jail, due to the fact that I plan on going to the court date. I just dont know what they can do.
Nothing you can do about the debt. Contract law and you signed a contract stating you would adhere to their conditions. You can ignore them and try and settle later on though. Or try and come up with enough cash (somehow) to get your debts back under the limit. But even then, guess what, they’ll still keep that interest rate at 33%.
(edited by Admin for language – haha)
I have a serious question to ask, it may have been covered but I would like to hear it for your mouth.
I recently heard of a Florida or Arkansass’ man have his debt cleared by a State judge. Is this a way to have your debt cleared or is it a bunch of crap? I haven’t read the story due to the fact I really don’t have the money for the lawyer.
Is there a way that I can fight the Credit card companies that have charged me Juice (Juice Rackeetering) on my credit cards. Juice is the interest paid on a loan, I’m sure you know that. I really feel it unfair that i had a nice 9.9% fixed credit card and cause of EXTREME financial dificullties I missed multipy payments. My interest in 2 months went from the comfortable 9.9 to 33.6% interest and I also kept being charged 17 late and over credit balance FEES. Totaling over 1224 dollars incurred from the credit card company itself. Excuse my ENGLISH, F**k THAT!!!! I did not open my a****** to a shelling like that. Soory, I am pissed off and want some better answers cause the United Socialist Regeim has not returned my calls……… Need a good writer, I’m cheap!!!! LMAO