Debt Consolidation

Can I Be Arrested for Debt?

No matter how much money you owe, the practice of sending people to jail for their debts has been illegal in America since the 1830s. That means no creditor of consumer debt — including credit cards, medical debt, a payday loan, mortgage or student loans — can force you to be arrested, jailed or put in any kind of court-ordered community service.

If you get sued for an unpaid debt, you’ll end up in civil court, not behind bars. However, in rare cases, a debt collection civil case could potentially turn into a criminal one and land you in jail.

3 cases where debt can lead to jail time

When does an unpaid bill go from a civil case to a criminal proceeding? When debtors are arrested, it’s not because they didn’t have the money to pay but because of actions related to that debt. Below are three common examples of how this happens:

1. When you’re in contempt of court order

In order to collect an unpaid debt, creditors will sue you to win a court-awarded monetary judgment, said Leslie Tayne, consumer attorney and founder of Tayne Law Group, a New York-based firm that focuses exclusively on consumer and business debt resolution and alternatives to bankruptcy.

If you receive a notice to appear in court because a lender has sued you, and you ignore that civil court order, you can be found in contempt of court. At this point, the civil case can enter criminal proceedings and a warrant can be issued for your arrest.

In other words, if you receive any kind of court notice, do not ignore it — even if you don’t recognize the company suing you. Aside from the possible legal troubles ahead, not showing up or failing to follow the instructions on the notice means you’ve missed the opportunity to settle the debt or negotiate a payment plan.

It’s also important to remember that lenders can sue you even if your debt is past the statute of limitations for collections, which varies from state to state. Most of the time, it falls between the three- to six-year range. If you get sued outside of that time frame, you could have a valid defense — but only if you show up.

2. When you fail to pay child support

Failing to pay child support always has the possibility of landing you in jail because this payment is court-ordered. When the court orders you to do something, like appear during a child support hearing or pay support and you fail to comply, you could be considered in contempt of court.

Again, it’s important to remember that you’re being arrested for violating the court order, not for any inability to pay, Tayne said. Enforcement tactics depend on the state and city laws where the money is being collected, and so do the ways you can contest a payment you believe is too high.

3. When you purposely deceive the IRS to get out of paying taxes

Failure to pay your taxes is typically a civil case. If you continue to rack up debt with the IRS, you’ll face some kind of collection of fines or fees. And if you make a mistake and you’re audited, the IRS places a civil judgment against you to collect the money owed. You may even come face-to-face with a tax lien where your house or car is seized to pay your debts. However, no matter how unpleasant, all of these instances are civil proceedings and won’t get you jail time.

The two tax-related scenarios that will get you a prison sentence are tax evasion and tax fraud. Evasion is when you knowingly refuse to file or pay your taxes, despite having the means to do so. Fraud is where you intentionally lie on your tax returns.

Making an honest mistake or not having enough money to pay won’t turn your tax-related civil case into a criminal proceeding, but purposefully trying to deceive the IRS by misreporting income, hiding assets and money, claiming expenses for work not actually performed, claiming more dependents than you have, and simply not filing can get you in hot water.

What should I do if a lender threatens to arrest me?

If a lender is acting particularly aggressive and threatening to have you arrested, their actions may be considered unlawful.

The Fair Debt Collection Practices Act makes it illegal for a debt collector to threaten you with jail time. If you believe the debt collectors coming after you are violating this act, make sure to document the abusive behavior and report it to the appropriate authorities. Research what constitutes illegal behavior, know your rights, then document thoroughly every phone call, letter and other points of contact so that you have evidence at hand while reporting the debt collector. Even details such as the time of a call are important since it’s illegal for debt collectors to call before 8 a.m. or after 9 p.m., according to the Fair Debt Collection Practices Act. Tayne recommends reporting the debt collector to the following authorities:

  1. State attorney general’s office
  2. Federal Trade Commission
  3. Consumer Financial Protection Bureau

On top of federal law, several states and cities have their own debt collection regulations. Tayne also recommends carefully reading the contract that you have with your lender, which will include information about how they can contact you. If they violate this contract or any law, you can file a lawsuit against them.

What can happen if I don’t pay what I owe?

Even if it doesn’t land you in jail, not paying your debts will certainly have other negative consequences on your life. Most notably, your credit score will be impacted and any debts you owe will generally stay on your credit report for seven years. This can affect whether you’re able to get a new credit card, mortgage loan or auto lease.

If it’s a secured loan you’re not paying, the creditor can repossess the valuables you used to back the loan, like your house or car.

Student loans are also considered “civil debts,” and you cannot be arrested for not paying them. But if you’re seriously behind on your payments and the lender can’t get in touch with you to figure out a payment plan, they may take you to court to request a wage garnishment. However, this typically only happens if all other methods have been unsuccessful and your student loan is turned to the Department of Justice for collection.

What your lender can and cannot do depends on the type of debt and state laws, so Tayne highly advises looking through your contract with the lender and then looking up the laws governing the state you live in. Information on wage garnishments will not appear on a credit report.

How to fix your debt situation

It’s much better to get a handle on your finances before you get to the point of legal action. There are several strategies you can use to pay off your debt faster, like the popular snowball method. This involves taking care of low-interest debt first before moving on to the next highest-interest account, and so on.

If you find yourself unable to repay your debts, consider the following steps to remedy the situation:

1. Negotiate with lenders

It can be overwhelming to speak with lenders who are already threatening you, but if you can stomach it, doing so can save you money.

2. Seek the help of a credit counselor

If you find that your financial situation is spiraling out of control, a trained professional can give you guidance on your current crisis. A credit counselor can also create a more holistic financial plan so that you don’t find yourself in the same situation in the future — like helping you create a working budget, devising a plan so you can get up to date with current bills and providing tools so that you can stay on top of the plan.

3. Enter into a debt management program

If you owe money to multiple creditors, entering a debt management program can help you better manage your debts. Your debt counselor will negotiate interest rates and fees associated with your debt on your behalf. In most programs, all of your payments will be consolidated into a single monthly payment which you will pay your credit counselor, who will then divide the money into appropriate payments for your various lenders.

4. Consider a debt consolidation loan

Similar to a debt management program, a debt consolidation loan also takes all of your accounts and consolidates them into a single monthly payment. The difference is that you’ll be taking out a new loan to pay off all of your existing debts. This does not eliminate your debts but rather rolls them into a single loan and monthly payment to keep debts manageable. If a debt consolidation loan sounds like the right move for you, consider using LendingTree’s personal loan tool to see what you qualify for from lenders.

Drowning in money troubles is stressful enough. Dealing with an aggressive lender threatening to have you arrested for your debt can make matters overwhelming. Before your situation gets out of control, know what lenders legally can and cannot do. Understanding your rights is the first step to getting your legal situation under control so that you can start making moves to get your financial situation to a manageable place.


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