Can you go to jail for credit card debt?

Being buried under a mountain of unpaid credit card bills has many consequences, but jail time is usually not one of them. If creditors call, you threaten to be arrested or give the impression that you could go to jail, they are misleading you and violating federal law.

A history of credit card debt and imprisonment

Debtor prisons 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 during the early 1800s, debtors’ prisons slowly fell out of favor until they were officially banned by the federal government in 1833.

Unfortunately, banning debtors’ prisons did not completely cause debt collection agencies to threaten people with jail time. As creditors continued to make bold and misleading claims to scare people into paying off their debts earlier, the U.S. government acted again, this time past the Fair Collection Practices Act in 1977.

This law limits what debt collection agencies can and cannot say to you while trying to make you pay your credit card debt – including prohibiting jail time for credit card debt.

What can debt collection agencies do

While debt collection agencies cannot have you arrested for failing to pay your credit card debt, creditors can still use the legal system to make sure they get their money back. The most common legal process is to sue for payment.

If you are being charged with unpaid credit card debt, don’t ignore the lawsuit. Failure to respond to a lawsuit or fail to arrive on the day of your court will result in a judgment in default against you. In a judgment in default, the judge will grant the prosecutor you sue everything he asks for in the lawsuit because you have not filed a case in your defense. Collection agencies are often allowed to seize your wages, lift your bank account, or take action against your personal assets to pay the debt as part of a default judgment.

Rather than ignoring a lawsuit, consider hiring a lawyer to represent you. They will help you respond, keep up with paperwork, and make sure you are treated fairly. Sometimes attorneys can arrange for your case to be thrown out or settled for a lower amount.

Taking advantage of this judgment, some creditors are petitioning the court to have you arrested for not cooperating, which is the only way to go to jail for your credit card debt. When this happens, you will be accused of disobeying the court order to pay your debt, not because you owe the debt yourself. This subtle distinction is enough for debt collection agencies to get around the Fair Debt Collection Practices Act in some states.

How to Control Credit Card Debt

The best way to avoid debt collection agencies is to take steps to pay off your credit card debt as soon as possible. At least every month, you should make the minimum payment on your card on time. 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 yourself out of credit card debt is a tough task, but it’s well worth it. You can relax without worrying about being charged or potentially serving jail time. Here are a few options to help you get out of credit card debt and on your way to recovery.

  • A credit adviser can assess your financial situation and negotiate with your creditors for one debt management plan for you. Under a debt management plan, you pay one fixed monthly payment to the credit consultancy, which then divides your payment among all of your creditors.
  • Consolidating your credit card debt can lower your interest rate and give you a monthly payment that is more manageable. If you have large balances on multiple credit cards, a debt consolidation plan will combine them into one loan that is easier to manage with a fixed monthly payment.
  • By working directly with your lender, you can lower your interest rate, your total amount owed, and the payment terms of your credit card debt. While your creditors will force you to repay the full amount you borrowed plus interest, they would rather receive some form of payment – even 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 redemption options so that they better match what you can reasonably pay each month.
  • Bankruptcy is a dramatic option that can resolve your credit card debt. There are two kinds bankruptcy that each handles your debt differently. In a Chapter 7 bankruptcy, your credit card debt will be canceled, but you may have to sell your assets to pay the creditors. In a Chapter 13 bankruptcy, your debt will be 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 treated as a last resort for paying off credit card debt.

it comes down to

Unceasing phone calls from debt collection agencies, a civil lawsuit, bankruptcy, and compromised credit are all real possibilities if you’re behind on your credit card payments. Even after you get out of deep credit card debt, it will take you years to rebuild your credit before you can qualify for the best credit cards and personal loan rates.

In the future, make a commitment to pay your balance on time and in full each month. Developing this discipline will make it much easier for you to pay off your current debt and avoid getting into debt again in the future.

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