Being buried under a mountain of unpaid credit card bills has many consequences, but jail time is not usually one of them. If creditors call threatening to have you arrested or implying that you could go to jail, they are misleading you and breaking federal law.
A history of credit card debt and jail time
Debtors’ prisons were once a common form of punishment for unpaid debts in America. As other methods of collecting unpaid debts (like bankruptcy proceedings) became more popular throughout the early 19th century, debtors’ prisons slowly fell out of favor until they were officially outlawed by the federal government in 1833.
Unfortunately, outlawing debtors’ prisons didn’t completely stop debt collectors from threatening people with jail time. Because creditors continued to make bold and deceptive claims to scare people into paying their debts back sooner, the U.S. government acted again, this time passing the Fair Debt Collection Practices Act (FDCPA) in 1977.
This act limits what debt collectors can and can’t say to you while trying to get you to pay your credit card debt — including outlawing threats of jail time for credit card debt.
What debt collectors can do
While debt collectors cannot have you arrested for not paying your credit card debt, creditors can still use the legal system to make sure they get their money back. The most common legal recourse is to sue you for payment.
If you get sued for unpaid credit card debt, don’t ignore the lawsuit. Failing to either respond to a lawsuit or show up to your court date will result in a default judgment against you. In a default judgment, the judge awards the creditor who is suing you everything they ask for in the lawsuit because you did not make a case in your defense. Debt collectors will often be allowed to garnish your wages, levy your bank account or act against your personal property to pay for 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 the paperwork and make sure you’re treated fairly. Sometimes, lawyers can get your case thrown out or settled for a lower amount.
Some creditors take advantage of this judgment and petition the court to have you arrested for not cooperating, which is the only way you might 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 get around the Fair Debt Collection Practices Act in some states.
How to get credit card debt under control
The best way to avoid debt collectors is to take steps to pay off your credit card debt as soon as possible. At the very least, you should be making your card’s minimum payment on time every month. While paying the minimum won’t do much to get you out of credit card debt, it will at least keep you from being delinquent on your payments.
Digging yourself out of credit card debt is a tough task, but very much worth it. You’ll be able to relax without the worry of being sued or possibly serving jail time. Here are a few options to help you get out of credit card debt and on the road to recovery.
Develop a debt management plan
A credit counselor can assess your financial situation and negotiate with your creditors to make a debt management plan for you. Under a debt management plan, you make one fixed monthly payment to the credit counseling agency which then distributes your payment to all of your creditors.
Consolidate your debt
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.
Talk to your lender.
Working directly with your lender can lower your interest rate, your overall amount due and the payment terms of your credit card debt. While your creditors will push you to repay the entire amount you’ve borrowed plus interest, they would rather receive some kind of payment — even if it’s less than the amount owed — than nothing at all. If you call your issuer, you may be able to negotiate your balance and repayment options to better match what you can reasonably pay each month.
Declare bankruptcy
Bankruptcy is a dramatic option that can resolve your credit card debt. There are two types of bankruptcy that each address your debt differently. In a Chapter 7 bankruptcy, your credit card debt is canceled, but you may have to sell off your possessions to pay the 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 treated as a last resort for getting out of credit card debt.
The bottom line
Incessant 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 emerge from deep credit card debt, it will take years of rebuilding your credit before you can qualify for the best credit cards and personal loan rates.
Going forward, commit to paying your balance on time and in full every month. Developing this discipline will make it much easier for you to pay off your current debt and avoid going back into debt in the future.
FAQs
In the United States, you cannot go to jail for not paying your credit card bill. A creditor or debt collector should never threaten you with jail for not paying your bill.
Can credit card debt put you in jail? ›
NO. You cannot go to jail simply for failing to pay your credit card debt. It is also illegal for creditors or debt collectors to threaten you with arrest or any kind of criminal penalty to try to get you to pay. Then…
What happens if you refuse to pay credit card debt? ›
If this happens: Your lender will contact you to demand the missing payments are made. Then if you don't make the payments they ask for, the account will default. And if you still don't pay, further action may be taken, such as employing debt collection agents to recover the money you owe them.
What happens if a credit card company sues you and you can't pay? ›
You may lose the ability to dispute the debt, if you believe you don't owe it or that the amount is wrong, and depending on your situation and your state's laws, the creditor may be able to: Garnish your wages. Place a lien against your property. Move to freeze funds in your bank account.
Can unpaid credit cards take you to court? ›
If you default on your credit card debt and are unable or unwilling to work out an arrangement with your credit card company, you risk being on the receiving end of a debt collection lawsuit. Getting sued by a creditor or collection agency can be an unsettling experience, especially if you don't know what to expect.
How much debt do you have to have to go to jail? ›
Just because you're behind on payments on your bills doesn't mean you can be arrested for debt. No consumer debtor, including one who owes money on credit cards, medical bills, payday loans, mortgages, or student loans, should be arrested.
What happens if you never pay collections? ›
If you don't pay, the collection agency can sue you to try to collect the debt. If successful, the court may grant them the authority to garnish your wages or bank account or place a lien on your property. You can defend yourself in a debt collection lawsuit or file bankruptcy to stop collection actions.
How can I legally avoid paying credit card debt? ›
If you want to know how to stop paying credit cards legally, that could be tackled with debt settlement programs or filing for bankruptcy. Some of these options can help you get much-needed temporary financial relief. Still, there are drawbacks to consider, including the risk of being sued or selling assets.
How to pay off credit card debt with no money? ›
How to Pay Off Credit Card Debt When You're Short on Cash
- Create a Budget and Stick to It.
- Secure an Additional Source of Income.
- Consider Nonprofit Credit Counseling and Financial Assistance.
- Look for Debt Relief.
- Understand How to Use Credit Responsibly.
- The Importance of Debt Reduction.
If you get a summons notifying you that a debt collector is suing you, don't ignore it. If you do, the collector may be able to get a default judgment against you (that is, the court enters judgment in the collector's favor because you didn't respond to defend yourself) and garnish your wages and bank account.
Lawsuits aren't very common, but they do happen regularly. According to a Consumer Financial Protection Bureau (CFPB) report, credit card companies sue for non-payment in about one of every seven cases or nearly 15% of the time. The average litigated account balances ranged from $2,700 to $12,300.
What are the chances a debt collector will sue? ›
How likely is it that you will be sued for a debt? According to one Consumer Financial Protection Bureau report, 1 in 7 — or about 15% — of consumers contacted about a debt in collections were sued. But the likelihood of a debt collection lawsuit depends on several factors.
What amount will a credit card sue for? ›
If you're carrying a balance on your credit card between $5,000 to $10,000 then there is an increased chance that the collection agency or creditor may file suit against you, especially if you have balance transfer cards. The collection agency will try to collect the full amount you owe.
Which credit card companies sue the most? ›
It is important to note that Capital One has the highest number of subprime borrowers of any lender in the U.S. This combined with the finding that it also files the most lawsuits means that some of the most vulnerable and financially-strapped people can find themselves feeling kicked when they're already down.
Can a credit card company take money from your bank account? ›
Can creditors see my bank account balance? The creditor won't necessarily see your exact account balance. However, if the amount they need to withdraw is available and they have a court judgment that allows them to do this, they can take that money directly from your account.
Will Capital One sue me for credit card debt? ›
If you've failed to make arrangements with Capital One to pay off your debt, they could pursue a lawsuit against you. If the case goes to court, a judge might award Capital One a default judgment against you.
What happens to unpaid credit card debt after 7 years? ›
After seven years, unpaid credit card debt falls off your credit report. The debt doesn't vanish completely, but it'll no longer impact your credit score. MoneyLion offers a service to help you find personal loan offers based on the info you provide, you can get matched with offers for up to $50,000 from top providers.
Can credit card debt garnish your bank account? ›
Yes, a debt collector can take money that you owe them directly from your bank account, but they have to win a lawsuit first. This is known as garnishing. The debt collector would warn you before they begin a lawsuit.
Can a bank take your money for credit card debt? ›
The Fair Credit Billing Act (FCBA), which protects consumers from unfair credit card billing practices, rules that banks cannot typically seize funds deposited into a consumer's bank account to pay off their credit card.
How do I fix my credit after jail? ›
Incarceration can lead to missed bill payments, debt accumulation, and a decline in credit score. You can rebuild credit by obtaining your credit reports, disputing errors, managing debt, and establishing new credit lines responsibly.
