When You Can (and Can’t) Be Arrested for Debt

You can’t be arrested for debt just because you’re behind on payments. 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.

These creditors can sue you for an unpaid debt in civil court, however, which could indirectly see you arrested for debt. That’s why it’s critical to respond to a court summons and cover court-ordered fines or payments, including child support.

3 cases where you can be arrested for debt

1. When you’re in contempt of a court order
2. When you fail to pay child support
3. When you purposely deceive the IRS to get out of paying taxes

1. When you’re in contempt of a court order

For creditors to collect an unpaid debt that is not guaranteed by collateral, they must sue you and win a court-awarded monetary judgment. 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 that point, the civil case can enter criminal proceedings and a warrant can be issued for your arrest.

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.

How to tell your debt lawsuit is legitimate

If you’re sued, keep in mind that there is a statute of limitations on debt. It’s illegal for a debt collector to sue you or threaten to sue you over a debt that is past the statute of limitations. This debt is considered “time-barred.”

These statutes vary by state and debt type, but typically last between three to six years. Note that there are some exceptions: For instance, the statute of limitations of credit card debt in Maine is six years and only three in New Hampshire, but in fellow New England state Rhode Island, it’s 10 years.

However, even if the debt is time-barred, the lender can still continue to contact you asking for payment. In some states, making a partial payment on time-barred debt actually “revives” the debt, meaning the statute of limitations on that debt is reset — allowing the debt collector to sue you once more to collect the full amount.

If you think a debt collector has violated the law, you can file a complaint with the Federal Trade Commission and your state’s attorney general, and also bring your own private action against the debt collector.

2. When you fail to pay child support

Failing to pay child support has the possibility of landing you in jail because it is a court-ordered payment. 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 bills. All 50 states have processes for criminal prosecution for failure to pay child support, but invocation of this process is rare.

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

Failure to pay your taxes could result in you being sued by the IRS (though the IRS does have extensive enforcement powers, and may be able to make collections without legal judgment).

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 would be able to sue you to collect the money owed. You may even come face-to-face with a tax lien where your house or car can be seized to pay your debts. However, no matter how unpleasant, all of these instances would be 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:

Tax fraud is different from tax negligence or avoidance. Tax avoidance is a legal way to minimize the amount of income tax owed. Examples of tax avoidance include deferring income by contributing to an IRA or 401(k), or claiming deductions you legally qualify for. Negligence is when you fail to make a reasonable attempt to comply with the tax laws — such as claiming a deduction you haven’t taken the time to determine if you truly qualify for.

Making an honest mistake or not having enough money to pay won’t turn your tax-related civil case into a criminal proceeding, but getting caught evading taxes or committing fraud will land you in hot water.

What to do if threatened that you’ll be arrested for debt

Review your rights under the FDCPA

If a lender or debt collector 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 debt collectors are violating this act, you should take the following steps:

• Research what constitutes illegal behavior and learn what your rights are. The Consumer Financial Protection Bureau can provide you with good information.
• Document the abusive behavior, including every phone call, letter or any other points of contact. 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.
• Report your complaints to either your state’s attorney general’s office, the Federal Trade Commission or the Consumer Financial Protection Bureau.

Check local and state debt collection laws

On top of federal law, several states and cities have their own debt collection regulations. Be sure to carefully read 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.

Send a cease communication letter

You can request debt collectors cease communications or only contact you in writing. After receiving the request, the debt collector is required by the FDCPA to obey it, and may only communicate with you to inform you that the debt has been terminated or that they are taking specific action, such as a lawsuit.

What can happen if you don’t pay what you owe

Your credit will take a big hit

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 can be impacted and any debts you owe 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.

Your assets could be seized

If you secured your loan with some form of collateral, such as your house or car, the creditor can repossess those assets as a way to pay back what you owe.

Your wages can be garnished

Wage garnishment is when a creditor obtains a court or government agency order that requires your employer to withhold a portion of your wages and send it to your creditor. The amount that can be garnished depends on the type of debt and your state’s garnishment laws.

For example, if you’re way behind on your federal student loan debts 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.

Note that student loans are also considered “civil debts,” and you cannot be arrested for not paying them.

5 ways to improve your debt situation

1. Take stock of your debt
2. Contact your creditors
3. Seek the help of a credit counselor
4. Enter into a debt management program
5. Consider debt consolidation

1. Take stock of your debt

Start by reviewing all of the debt you owe. You may find that the debt is time-barred. In some instances, the debt might not even be yours — debt collectors have been known to make mistakes, or participate in debt consolidation scams.

2. Contact your creditors

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. Ultimately, creditors just want to get repaid. If you come to them with a cool head and explain your current financial situation, oftentimes creditors are willing to hear you out and negotiate a deal.

If you do choose to have that conversation, make sure you come to them with a suggestion on how to resolve your debt. Explain how much you can pay toward your debt on a monthly basis, and if you need any additional assistance, such as lower fees or interest rates. If your debtors agree to a new repayment plan, be sure to document it and send along to your creditors for transparency.

3. 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 debt crisis.

A credit counseling service can 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.

4. 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. This is a service provided by nonprofit credit counseling agencies that’s designed to help consumers get out of debt over three to five years.

A credit counselor will negotiate interest rates and fees for your debt on your behalf and consolidate all of it into a single monthly payment. You’ll then make that payment directly to the credit counselor, who will divide the money into appropriate payments for your various lenders.

When you enroll, you can expect to pay an enrollment fee of around $25, plus a monthly maintenance fee between $25 and $50. Once enrolled, your credit counselor will contact your lenders and notify them that they’ll be making payments on your behalf. That means you’ll no longer receive collection calls.

You can enroll credit card debts, student loan debts, medical bills and personal loans into a debt management program. Secured debt cannot be enrolled. Note that you won’t be able to take on new forms of credit while you’re enrolled in the program. You may even be asked to close most lines of credit (one may be allowed only for emergency purposes).

You can use the following resources to find a debt management program that makes sense for you:

• National Foundation for Credit Counseling (NFCC) locator
• Financial Counseling Association of America (FCAA)
• U.S. Department of Justice (DOJ) list of approved credit counseling agencies

5. Consider debt consolidation

A debt consolidation loan is a personal loan that you use to pay off other debts. It works by combining all of your debts into a single, larger debt that you then pay off monthly. This means your debt is transferred to a different lender who you’ll then make direct payments to. Similarly, you can also consolidate credit debt from multiple issuers with a single balance transfer card.

You can apply for various debt consolidation methods through your bank, credit union, credit card company or other lender. The benefit of debt consolidation is that you can make your debt more manageable by combining it. This often helps you qualify for a better rate than what you would have been paying to each lender separately. Furthermore, debt consolidation can cut down on the collect calls you receive.

Here are a few common ways to consolidate your debt:

There are downsides to debt consolidation. Debt consolidation loans, in particular, can have longer repayment schedules. This may mean you’ll pay more in interest charges over the long run than if you paid off each lender individually, depending on the rate you qualify for. These loans can also come with an origination fee equal to 1% to 8% of your loan amount. However, these downsides may be worthwhile if you can get debt out of collections and have an affordable repayment plan.