Key takeaways
- Creditors cannot have you arrested for credit card debt, but they can sue you for payment.
- If sued and you do not respond, a default judgment may award creditors everything they’ve asked for and result in garnishment of your wages or other actions to recover their losses.
- Options for getting out of credit card debt include developing a debt management plan, consolidating debt, talking to your lender or declaring bankruptcy.
- It’s important to pay off credit card debt on time and in full to avoid damaging your credit and future financial opportunities.
First of all, no, you can’t go to jail for credit card debt. Debtors prison hasn’t been a thing since the 1800s.
Unpaid credit card bills do have consequences, though, even if jail time isn’t one of them. And there are plenty of people living with those consequences. Eighteen percent of credit card debtors have been in debt for five years or more — and 6 percent expect to never be able to pay off their debt, according to Bankrate’s Credit Card Debt Survey.
If you’re among those who have outstanding credit card debt, and you’re receiving calls from debt collectors, it’s important to understand what collectors can and can’t do. For instance, if creditors call threatening to have you arrested or implying that you could go to jail, they’re misleading you and breaking federal law — the Fair Debt Collection Practices Act (FDCPA) specifically — which prohibits deceptive claims intended to scare people into paying their debt.
What debt collectors could do
Debt collectors can’t have you arrested for not paying credit card debt, but creditors can go through the legal system to force you to pay back your debt. Most commonly, creditors choose to sue you for payment. Even though it’s the most common option, it’s still relatively rare because of the costs involved in bringing a suit to court.
Don’t ignore the lawsuit if you are sued for credit card debt. 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 didn’t 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, which saves you money in the long run.
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 FDCPA 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 and help maintain your credit score. Payment history makes up 35 percent of your FICO score, so staying on top of payments matters even if you can’t fully pay off your debt.
Digging 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 having collectors after you. Here are a few options to 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 a credit counseling agency, who then distributes your payment to your creditors.
Consolidate your debt
Consolidating 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.
Depending on your credit score and the size of your debt, you might be able to qualify for a balance transfer credit card that would provide time to pay off your debt without accruing additional interest charges.
Talk to your lender
Working directly with your lender could lead to a lower interest rate or overall amount due and helpfully adjust 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, ask to speak to someone about their “hardship program,” which most major issuers have. You may be able to negotiate your interest rate and repayment options to better align with what you can reasonably pay each month.
Bankrate’s take: If at all possible, make this call before you miss a payment. That shows a good faith effort on your part to repay your debt and helps protect your credit score. Banks are unlikely to forgive your debt or lower your balance except in rare and unique circumstances, but they often are willing to work with you to craft terms you can better manage.
Declare bankruptcy
Bankruptcy is a dramatic option that can resolve your credit card debt. There are two types of bankruptcy that 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.
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 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 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.
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 can take years of rebuilding your credit before you can qualify for the best credit cards and personal loan rates again.
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 getting back into debt in the future.
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