Can You Go to Jail for Debt?

You cannot be arrested solely for owing money on what is known as consumer debt, such as a credit card, student loan, or medical bill. Collectors cannot even intimidate you with arrest. However, they have additional legal options, such as threatening to sue you for payment.

Also, in some instances, debts can result in arrest for other offenses such as fraud, theft, or disobeying a court order.

What are some of these instances? Read on to find out.

 

Circumstances in which you may be jailed 

1. When you violate a court order

To collect an outstanding unsecured (by collateral) debt, creditors must sue you and obtain a monetary judgment from a court. If they summon you to appear in court because of the lawsuit and disregard the order, you can be accused of contempt.

Accordingly, the courts may convert the civil case to a criminal proceeding, issuing a warrant for your arrest. If you receive any court notice, do not disregard it — even if the party suing you is unfamiliar to you.

According to the American Civil Liberties Union, a court can order an arrest and prison sentence for contempt of court in 26 states: Arizona, Arkansas, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Utah, Washington, Wisconsin.

Apart from the potential legal consequences, failing to appear or comply with the notice’s instructions means you’ve missed a chance to resolve the issue or discuss a payment plan.

Determine if the lawsuit is valid

But how can you determine whether or not your lawsuit is valid? If you are sued, please note that liability is subject to limitations. A collector is prohibited from suing you or threatening to sue you for a liability that has passed the statute of limitations. This debt is referred to as “time-barred.”

These provisions vary from state to state and type of liability but are typically between three and six years in duration. Take note that there are certain exceptions: for example, the statute of limitations on credit card balance is six years in Maine and three years in New Hampshire, but ten years in neighboring New England state Rhode Island.

The creditor may contact you to collect payment even when the dues are time-barred. In certain states, making a small payment on a time-barred debt “revives” the liability, resetting the statute of limitations and allowing the collection agency to sue you again for the total amount.

Suppose you believe a collector has acted illegally. In that case, you may file a grievance with the Federal Trade Commission and the attorney general of your state, as well as bring your civil suit against the collector.

 

2. When you default on child support payments

Failure to pay child support may result in jail time, a court-ordered charge. You may be held in contempt of court when you fail to comply with a court order — such as appearing at a hearing or paying support.

Again, it is critical to keep in mind that you are being charged with violating the judge’s order, not for being unable to pay your bills. Each of the 50 states has a process for prosecuting individuals for failing to pay child support, yet the execution of this process is uncommon.

However, you can get up to six months of jail time in Alabama, Colorado, Florida, Indiana, Maryland, Michigan, Missouri, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, and Washington.

 

3. When you intentionally deceive the IRS to avoid paying taxes

Failing to pay your taxes may result in an IRS lawsuit. However, the IRS has broad enforcement authority and may collect without a court order.

If you continue racking up IRS balance, you will be subject to some form of a collection of punitive damages or fees. Additionally, if you screw up and are audited, the IRS may sue you to recover the money owed. You may even face a tax lien in which your home or vehicle is seized to satisfy your debts. Nevertheless, although these instances are pretty unpleasant, they’ll only lead to a proceeding and not jail time.

Tax evasion and fraud

Tax evasion and fraud are the two scenarios that will result in a prison sentence.

In general, tax evasion occurs when you knowingly fail to pay or file your taxes, ignoring the fact that you have the means to do so. Common examples include underreporting income, misreporting income records, intentionally underpaying taxes, and declaring illegitimate or fictitious business expenses.

On the contrary, tax fraud occurs when you purposefully falsify information on your returns to reduce your tax liability—for instance, claiming erroneous deductions, declaring personal expenses as work expenses, utilizing a falsified social security number, and failing to report income.

Tax evasion is distinct from tax evasion or avoidance and tax avoidance is a strategy for lowering one’s income tax liability. Tax avoidance strategies include deferring income through IRA or 401(k) contributions and claiming deductions that you are legally entitled to.

Negligence occurs when you don’t make a reasonable effort to comply with tax laws — for example, by claiming a deduction for which you have not taken the time to assess whether you truly qualify.

Making an innocent mistake or having insufficient money to pay will not result in converting your tax-related case to a criminal case, but being nabbed evading taxes or scamming the system will land you in problems.

 

4. When you fail the debtor’s examination

While this is not a liability in and of itself, it is one way that can result in jail time. When a creditor obtains a judgment on you and discovers that you have no money or assets to appropriate, a debtor’s examination is requested. At that point, the creditor files paperwork with the court requesting that you appear before a judge for a debtor’s examination.

In essence, a debtor’s examination is a court examination in which you must respond under oath. You must respond to the creditor’s inquiries about your financial situation. Additionally, it would help to clarify why you owe the creditor money.

Note that: If you fail to appear for the debtor’s questioning, the court of law might hold you in contempt for failing to comply with the court’s appearance order. Also, if you don’t appear in court at that time, you may face jail time.

The states where collection agencies are most likely to arrest you using these strategies are Illinois, Minnesota, Missouri, Ohio, and Pennsylvania.

On the other hand, if you appear in court, you must obey the court’s orders and take any necessary steps to rectify the situation.

 

Which types of debts are not punishable by imprisonment?

By now, you probably know which types of debts are not punishable by imprisonment. These debts are consumer debts, implying that they occur when an individual purchases goods or services. Under Fair Debt Collection Practices Act (FDCPA), collectors are not authorized to harass or threaten borrowers with jail or arrest for these types of debts.

We’ve listed them below. Note that: the list is not conclusive.

• Credit card debts
• Student and car loans
• Payday loans
• Unpaid rent
• Mortgage
• Hospital bills
• Account overdraft
• Unpaid utility bills

 

How to Safeguard Yourself

Here are some strategies for avoiding jail time:

• Do not disregard court notices or orders. Even if you believe the creditor is demanding, you must take these notifications and orders seriously.
• Attend the hearings, even if they appear to be a waste of time. Often, a creditor will leave you alone the second or third attempt if they realize they cannot collect from you.
• Consult a local attorney or the consumer division of your state attorney general.
• If you are eligible, file for bankruptcy. Bankruptcy is the fastest and most efficient way to break the cycle.

 

What Can I Do If I Can’t Pay My Debts?

It can be very upsetting not to be able to pay your debts. However, keep in mind that there will always be options and solutions. One option is to consolidate liability, and another is to declare bankruptcy. While declaring bankruptcy has ramifications, it also refreshes your financial situation. As a result, you will have a new beginning. Reach out to Consumer Protection Group if you need further assistance with debt legal help!

 

In conclusion

While there is no immunity for liability relief, please note that there are a few situations in which your dues could lead to some jail time. However, if you feel trapped, you can unshackle yourself by putting a plan in place to deal with it permanently.