Not being able to meet payment obligations can make anyone anxious and worried, but in most cases, you won't have to worry about serving time in jail if you can't pay your debts. You can't be arrested or go to jail simply because you've matured credit card debt or student loan debt, for example. Keep in mind that student loans are also considered “civil debts” and they can't arrest you for not paying them. No, you can't be arrested for defaulting on a payday loan.
However, if you are being sued or a court judgment was entered against you and you ignore a court order to appear, a judge can issue an arrest warrant against you. You can't go to jail for not paying a payday loan. However, you can be sentenced to prison if you miss a court appearance or ignore a court summons. Be proactive and make sure you are there and fully prepared for any court challenges.
Better yet, first work with your lender to avoid any subpoenas. In recent years, “payday loans” have become increasingly popular in the United States, including in the state of Texas. For various reasons, the rates at which borrowers stop paying these loans are extremely high. If you have defaulted on a payday loan, or are worried that you will stop paying one in the near future, you may be worried about going to jail for not paying the loan.
You won't go to jail if you don't pay a “payday loan.”. The law in the United States is very clear: debtors cannot be imprisoned for not paying a debt. Our bankruptcy laws are federal laws that allow debtors to apply for bankruptcy protection when they are unable to pay their debts. In addition, debt collection is a matter of civil law, not criminal.
A creditor can request collection of a debt through civil courts in the United States; however, debtors cannot be prosecuted in criminal court for failing to pay a debt. The creditor (the payday loan company) certainly has the right to request repayment through legal methods of collection, including filing a small claims lawsuit against the debtor. However, they really try to collect the debt by calling you day and night, at work or home. If your postdated check is deposited and it “bounces,” or if there are not enough funds in your account when the payday lender tries to repay itself, the payday lender may inform you that you have committed a crime and that you are going to be arrested.
A creditor can't put you in jail. Lawyers can pursue you if they think you have committed a crime. However, virtually every prosecutor knows that not paying a payday loan is not a crime and they won't even try to prosecute it. In fact, most payday lenders know that prosecutors don't have time for a payday lender to use state offices to collect their debt and their crazy interest rates and they won't even contact them.
They will threaten to contact them in an attempt to scare you into paying. I've even seen Payday lenders lie and say they're “Investigator Jones” to scare a debtor into paying a debt. It is not a crime not to pay a payday loan. If you are concerned about a defaulting payday loan, bankruptcy may be the best solution.
Filing for bankruptcy will not only make all creditors' collection efforts cease immediately, but it can also eliminate most of your debt and provide you with a fresh start. I have been practicing bankruptcy law exclusively in Texas for almost 40 years. Unlike most other law firms, my firm is dedicated solely to helping individuals and small businesses find a way out of their financial difficulties by using our country's bankruptcy laws. Not surprisingly, borrowers often fail to pay because they can't repay the loan plus all the exorbitant interest and charges.
Often, a borrower does not have the funds to repay the loan when it matures, so the loan is renewed and another large chunk of interest is added to the debt. You can enroll credit card debt, student loan debt, medical bills, and personal loans in a debt management program. Debt collectors don't waste time when a borrower fails to repay their payday loan by the due date. So what if you're among the 80% of borrowers who can't repay your payday loan? Are you going to face jail?.
In some states, if a business that is not licensed in your state grants a payday loan, the payday loan may become invalidated. If you insured your loan with some type of collateral, such as your house or car, the creditor can recover those assets as a way to pay what you owe. For example, if you are far behind on your federal student loan debt and the lender cannot contact you to determine a repayment plan, you may be taken to court to request a wage garnishment. In most cases of payday loan debt, a borrower simply does not realize how much interest and charges add to the total cost of the payday loan.
That means only 20% of borrowers actually have the money to repay their loan as scheduled on their next payday. . .