Can You Go To Jail For Credit Card Debt?
Being buried under a mountain of unpaid credit card bills has many consequences, but jail is usually not one of them. If creditors call, threatening to arrest you, or suggesting that you could go to jail, they are misleading you and breaking federal law.
A story of credit card debt and jail time
Prisons for debtors were once a common form of punishment for unpaid debts in America. While other methods of collecting unpaid debts (such as bankruptcy proceedings) became more popular in the early 19th century, debtors’ prisons slowly fell out of favor until they were officially banned by the government. federal in 1833.
Unfortunately, banning debtors’ prisons hasn’t completely stopped debt collectors from threatening people with jail time. Because creditors have continued to make bold and deceptive statements to scare people off paying off debts sooner, the US government has acted again, this time by passing the Fair Debt Collection Practices Act in 1977.
This law limits what debt collectors can and cannot tell you while trying to get you to pay off your credit card debt, including prohibiting threats of jail for credit card debt.
What debt collectors can do
Although debt collectors cannot get you arrested for non-payment of your credit card debt, creditors can still use the legal system to make sure they get their money back. The most common legal remedy is to sue you for payment.
If you’re sued for unpaid credit card debt, don’t ignore the lawsuit. Failure to respond to a lawsuit or fail to show up on your court date will result in a default judgment against you. In a default judgment, the judge grants the creditor suing you whatever he asks for in the lawsuit because you did not plead for your defense. Debt collectors will often be allowed to garnish your wages, take your bank account, or act on your personal property to pay off the debt as part of a default judgment.
Instead of ignoring a lawsuit, consider hiring a lawyer to represent you. They will help you respond, keep track of paperwork, and make sure you are treated fairly. Sometimes lawyers can have your case dismissed or settled for a lower amount.
Some creditors take advantage of this judgment and ask the court to arrest you for refusing to cooperate, which is the only way to go to jail for your credit card debt. If this happens, the charges against you will be for ignoring the court order to pay your debt, not for owing the debt itself. This subtle distinction is enough for debt collectors to circumvent the Fair Debt Collection Practices Act in some states.
How to get a handle on credit card debt
The best way to avoid debt collectors is to take action to pay off your credit card debt as soon as possible. At the very least, you should make your card’s minimum payment on time each month. While paying the minimum won’t do much to get you out of credit card debt, it will at least keep you from falling behind on your payments.
Getting rid of credit card debt is a difficult task, but it is well worth it. You can relax without fear of being prosecuted or possibly serving a prison sentence. Here are some options to help you get out of credit card debt and on the road to recovery.
- A credit counselor can assess your financial situation and negotiate with your creditors to make a debt management plan for you. As part of a debt management plan, you make a fixed monthly payment to the credit counseling agency who then distributes your payment to all of your creditors.
- Consolidating your credit card debt can lower your interest rate and give you a more manageable monthly payment. If you have large balances on multiple credit cards, a debt consolidation the plan will consolidate them into one more manageable loan with a fixed monthly payment.
- Working directly with your lender can lower your interest rate, your overall amount owed, and your credit card debt payment terms. While your creditors will push you to pay back the full amount you borrowed plus interest, they’d rather receive some kind of payment – even if it’s less than the amount owed – than nothing at all. If you call your credit card company, you may be able to negotiate your balance and repayment options to better match what you can realistically afford each month.
- Bankruptcy is a dramatic option that can resolve your credit card debt. There are two types of bankruptcy that everyone approaches your debt differently. In a Chapter 7 bankruptcy, your credit card debt is canceled, but you may have to sell your assets to pay off creditors. In a Chapter 13 bankruptcy, your debt is reorganized and renegotiated to be paid over the next three to five years. Bankruptcy affects your credit for several years – 10 years for Chapter 7 and seven years for Chapter 13 – and should be seen as a last resort to get out of credit card debt.
The bottom line
Constant calls from debt collectors, a civil lawsuit, bankruptcy, and tarnished credit are all real possibilities if you fall behind on your credit card payments. Even after you’ve gotten out of significant credit card debt, it will take years to rebuild your credit before you can qualify for credit. best credit cards and personal loan rates.
Going forward, make a commitment to pay your balance on time and in full every month. By developing this discipline, it will be much easier for you to pay off your current debt and avoid going into debt in the future.