Many people have fear that they may end up in prison for not paying their credit card debt. Many collection agencies are intimidating debtors with threats provided by agents such as
“if you don’t pay off your debt, then be ready to go to jail.”
I will attempt to organize and present the information, which I have analyzed, which would help you understand and choose what best suits your case.
This article and the comments below it are full of useful information about penalty of non-payment of your creditors. So take your time to review this post and feel free leave questions or comments.
Non-payments on debt is not considered a crime in the U.S. The U.S. hasn’t make use of a debtor’s prison since the 50’s. Some countries have strict policy against default and can place a debtor in prison for failing to make payments. However, the U.S. government has a vested interest in making debt a desirable fact, therefore debt is not criminalized. In order to go to prison you must be proven guilty of criminal behavior. Different states have different Laws regarding these issues.
If you are defaulting, then the following would be your options:
- Pay/Settle your debt (If you already have some cash).
- File bankruptcy (an often nightmare).
- Ignore and possibly end up in jail for contempt of court order (Happens rarely).
- Start payment of full amount.
- Exit U.S.
What will probably happen?
According to my knowledge and expertise, your creditor can take you to civil court and obtain judgment against you claiming that you owe him debt. Through the judgment the collector can then get liens against your property and/or garnish your wages. But getting to this point of wage payment or holding your property is time consuming and usually never occurs. This is because the collector has to go through a process that is explained later in this article.
Going to jail for contempt wasn’t something that I thought could occur, but then recently I’ve read some articles, which have made me realize that in some rare cases an arrest warrant can be issued for (in cases where there is contempt of court). I think that is related to your not showing up in court, but from what I’ve read; these arrest warrants are very uncommon.
In general, the negative consequences (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 (in excess of $1,000) the more likely the creditor or collection agency will pursue legal action against the debtor.
Generally these guidelines are followed in this course of action:
When you default (on your payments), your credit collection division calls you (almost everyday) to convince you into making a payment. Usually they give up the phone calls and letters within 1 to 2 years. They can’t get you to pay so they (usually another collection agency, not the original creditor) sue you in civil court.
This can also happen while you are involved with the “debt settlement program”. Normally, they won’t bother to sue you, because it’s a time consuming process. So, unless they are certain that they can get some money out of you, they don’t sue.
Keep in mind that there are rules that collection agencies must follow according to the “Fair Debt Collection Practices Act.” If they are not following these rules, then you can also file a suit against them. For example, if they have your cellular/phone number, they are not permitted to call your family, friends, or company (if you ask them not to). Also, you can write a cease and desist letter which instructs them to only communicate with you via U.S. post/snail mail.
These are some of the scenarios that you should serious consider:
You don’t show up in the court and the judge rules in favor of the creditor. This ruling is an acknowledgement that you owe the money. I’ve read that around 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’s all. But for collection, another court date must be assigned to perform a ‘writ of execution’. If they call you for this, and you don’t show up, then they may issue a bench warrant for your arrest.
A writ of execution is a general court order approved by a court in an attempt to satisfy a ruling obtained by applicant. Court normally will order a sheriff or other similar authorized person to levy assets owned by a judgment debtor. Such assets will often then be sold in sheriff’s sale, and the proceeds compensated to the claimant in partial or full satisfaction of the verdict. It is generally considered preferable for the sheriff simply to take possession of money from the defendant’s bank account. If the judgment debtor owns real property, the judgment creditor can record the implementation to “freeze” the title until the implementation is satisfied.
Not showing up on this one would automatically mean Contempt of Court. This is the part of the procedure where the specifics will be carefully looked at. This is where they get your employment information for wage garnishment or asset information for liens. But do keep this in mind that most collections will hardly get to this point. It totally depends on how aggressive they are on your particular case. Many people are in fact in a position where they cannot be collected on. If incase you are disabled and/or on limited income, chances are that they can get a judgment but will never be able to collect the debt. There is also a Federal minimum wage pay per week (around 30 hours), which if you make below, they cannot collect. For example, if you make a minimum wage of $5.80 per hour, times 30 hours, comes to $174 per week or $702 /month. If you make equal to that or less they cannot lay a hand on you. Money that is in IRA’s, custodial accounts, trusts, annuities, and insurance contracts are often untouchable.
Defending yourself against the creditor. Here, you give details as to why you do not owe the money or are unable to pay, due to particular reasons. The judge may or may not rule in your favor. My advice is that if you seriously can’t pay or don’t owe the money then just walk into the court and try and defend yourself and hopefully (90% of the times) things will work out your way.
The wage garnishment depends on many factors such as: your income level, your spouse’s income may also be taken into consideration, and the number of dependents you have.
Possibility of airport arrest in U.S?
Many people are concerned about this question. Families moved away from the U.S (to some other country) and they have a massive debt that they’ve left behind. Now they plan on returning to the U.S. for a family visit or vacation and they are worried sick about outstanding arrest warrant related to the debt.
If you are worried about this risk try performing an information search on yourself at a site like this one . You can also take precautionary measures and avoid entering the state where you used to reside. Now, if you have an arrest warrant for fraud (related to your debt) the likelihood that arrest may be carried out will be a bit more, since this is a criminal, not civil arrest warrant.
Also, if you acquired debt by committing fraud, you can go to jail. For example, let’s assume that 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 and you fill out the application and mail it in. Now, if you get the card and start using this new credit card, which is in someone else’s name then this is fraud and if convicted, you could end up in jail. Once, this happened to my cousin. My cousin moved out of her apartment and the incoming tenant received her mail and ran up thousands of dollars in retail charges. My cousin had to get a lawyer involved and it took years to get this completely removed from her credit report.
Perhaps you ‘borrow’ your brother’s credit card and go out spending a couple of grand without him knowing about it. Then you could be fined and or also imprisoned for fraud. This type of conduct is also considered fraud and criminal in nature.
You could also end up in prison if you ran up debt worth thousands of dollars on credit cards with intent of not paying back. Recently the federal government changed the law on the subject of filing bankruptcy for credit card debt. The new regulation makes it hard to erase the debts you owe to credit card companies. Before this rule went into effect, bankruptcy courts received a record number of new filings. Broke citizens were all trying to file in bankruptcy before the law came into effect.
Back then, I had an colleague who had in fact, filed bankruptcy on debts to various creditors, worth over $75,000. We were discussing the new law and he suggested that he had tens of thousands of dollars in credit card debt. When the bills came unpaid he would simply file bankruptcy, before the new law took effect.
Many citizens do exactly that. But, if the credit card company can prove that this was intentional in court, then most judges would find you guilty of fraud (for intentionally taking out loans that you did not plan on repaying). However, it is always difficult to prove that someone had no intention of repaying. For example, if you applied for five credit cards, reached the limits for a total of $12,500, and then never made a payment, you could end up in trouble. It would be very clear that your intention was criminal.
So, if it is proved that you had received money or goods by misleading means, you may be eligible for a criminal conviction.
You could also be put away for the following:
- If you disobey a court ruling (a ruling against you to pay child support).
- If you are found guilty of deliberately failing to pay your income tax to the government.
- If you are attempting to hide property or income to avoid non-payment (of debt), for which there is a verdict against you.
Criminal penalties (Bankruptcy related acts) include:
- If you take advantage of tenants (fraud).
- If you falsify a insolvency adjudicators signature
- If you commit lying under oath during the creditor’s meeting
Do keep this in mind that there is a difference in a judgment (civil court decision in cases where you owe money to another party), and a verdict (criminal court conviction of an offense). In a civil court case the outcome will largely depend on the judge and his understanding of the situation.
Simply failing to pay on your debt is not a crime
If simply non-payment of your debts was a crime then half the people you know would be in jail. Even the author of this article J, although my debt is caught up now and ill soon pay it off in full. Due to debt, many people have lost their jobs, assets and had unexpected medical issues that forced serious changes to their lifestyle. Collection agencies and collectors will often scare you with statements. But, like I said earlier, collection agencies will do anything they can to persuade you to pay the debt but you cannot go to jail for simply failing payment. This is why we have debt settlement, bankruptcy, and ruined credit scores.
List of negative consequences that you may be eligible for:
- Collection Agents and Agencies may bother you by calling over and over again.
- They may also call your place of employment and ask for your whereabouts.
- They can also call your neighbors and ask them if they know where you are.
- They can take legal action against you in civil court for the outstanding debt.
- They can win a judgment in civil court against you for the debt owed.
- Through the ruling they can garnish wages from your paycheck.
- Through the judgment they can garnish your banking accounts.
- In some states, they can get a lien against your property (house) and sell it to pay off the debt.
- They can also report the collection information to credit bureaus which lowers one’s credit score.
In short the answer is NO
You can’t go be behind bars for simply not paying your debts, unless you are in contempt of court. But the fact is that creditors and collection agencies will try and make your life a living hell. So it’s in your best interest to get this situation handled in a manner that suits you.
Some collectors will try and scare by any means they can to force you to pay up. My advice is that you should educate yourself about your options and avoid taking debt if you can. Get acquainted with “debt and collection” articles, facts and findings. Please leave your opinions, testimonials, questions and queries in the comment field.