Debt

Can You Go to Jail for Debt?

Not being able to meet payment obligations can make anyone feel anxious and worried, but in most cases, you won't have to worry about serving jail time if you are unable to pay off your debts.

You cannot be arrested or go to jail simply for being past-due on credit card debt or student loan debt, for instance. If you've failed to pay taxes or child support, however, you may have reason to be concerned.

What Kinds of Debt Can You Go to Jail For?

There are a couple of instances where it may be possible to serve time as a result of not paying your debts, such as if you've failed to pay your federal taxes or make child support payments.

Deliberately not paying or underpaying federal taxes can lead to a prison sentence, but only if you've been charged with and convicted of a tax-related crime such as filing a fraudulent tax return or not filing a tax return at all. If you do file a return but aren't able to pay your taxes, the federal government won't throw you in prison.

Failure to pay child support also can put you behind bars. Under federal law, you could be sentenced to as much as six months or two years in prison for dodging child support payments, depending on the circumstances. In addition, state laws may let a judge send someone to jail for disobeying a court order to pay child support.

Can You Go to Jail for Not Paying Student Loan Debt?

You can't be arrested or sentenced to time behind bars for not paying student loan debt because student loans are considered "civil" debts. This type of debt includes credit card debt and medical bills, and can't result in an arrest or jail sentence. However, student loan servicers will pursue various other avenues for collecting past-due debt, including turning over the debt to the U.S. Department of Justice to try to collect the debt via litigation. In the unlikely event you're sued for student debt, it's possible to be arrested if you fail to appear in court.

Can a Debt Collector Sue Me?

A debt collector can file a lawsuit against you in order to collect money that you owe. A collector takes this legal action in hopes of getting a judge to issue an order requiring you to pay the debt. If you're notified that you're supposed to appear in court to face the judgment but you ignore the order, a judge could demand that you be arrested for contempt of court.

So, not obeying a court order regarding unpaid debt could put you in handcuffs, but the debt itself can't lead to an arrest.

What Is the Statute of Limitations on Debt?

The statute of limitations on debt collection is the limited period of time debt collectors and creditors are given to sue you over past-due debt.

The federal Fair Debt Collection Practices Act governs the statute of limitations for debt; state laws also may affect this. Therefore, the statute of limitations on collecting a debt varies depending on where you live. Generally, the statute of limitations for debt runs three to six years.

In terms of your credit scores, the statute of limitations expiring on debt doesn't mean the unpaid amount won't show up on your credit report. That's because the debt itself hasn't expired and its presence on your credit report can continue to affect your credit score. Negative information like an unpaid debt can remain on your credit report for up to seven years, regardless of the debt's statute of limitations.

What Is Time-Barred Debt?

Once the age of a debt surpasses the applicable legal time limits for a creditor or debt collector to file a lawsuit, their claim may be "barred" under the statute of limitations. If you're sued over a debt but it falls outside the statute of limitations, the debt may be considered too old, giving you a potential defense in court.

In some states, the period for the statute of limitations starts when you fail to make a debt payment. Elsewhere, the timer may start going back to when you made your most recent payment. In some states, the clock may restart when you make a partial payment on the disputed debt.

A common misconception is that making a payment on a past-due debt can restart the clock on how long the item can remain on your credit report, but that's not the case. When you made your last payment has no bearing on how long an item can remain on your credit report.

What Can and Can't Debt Collectors Do?

It's smart to be equipped with knowledge about what debt collectors legally can and cannot do when they're seeking a debt payment from you.

Legally, a debt collector can only contact you about household debts like credit card bills, auto loans, medical bills, student loans and mortgage payments. A debt collector can reach out to you by phone, email, text message or letter—and, starting in October 2021, via social media.

Within five days of initially contacting you, a debt collector must send you a notice outlining how much money you owe, the name of the creditor to whom the money is owed and what you can do if you believe you don't owe this debt.

Debt collectors are prohibited from harassing you, lying to you or engaging in unfair practices. For instance, a debt collector can't threaten to harm you, falsely claim you'll be arrested or threaten to take your property.

Also, debt collectors can't contact you before 8 a.m. or after 9 p.m. unless you give them permission, can't reach out to you at work if you're unable to take calls there and can't contact you in most cases if you've asked them by letter to stop contacting you. In addition, a debt collector generally can't talk with anyone about your debt except you or your spouse.

How to Get Out of Debt

Dealing with debt collectors can be frustrating. But you can avoid that frustration by focusing on getting out of debt. What are the best ways to do that? Here are five tips.

1. Set Up a Budget

Establishing a budget can help you get a handle on how much money is coming in and going out, and then help you identify how much of that money you can set aside to pay off debt. Once you establish a budget, however, it's important to stick to it as closely as you can and then make modifications as needed once you better understand your income and expenses.

2. Bring in More Money

Extra cash can give you a major boost in abolishing debt. You might start a side hustle, take on extra hours at your job, find a second job or sell unwanted items around the house to generate more money for reducing your debt.

3. Look Into Debt Consolidation

A balance transfer credit card or a debt consolidation loan may help you save hundreds or even thousands of dollars when wiping out debt. The idea here is to exchange higher-interest debt for lower-interest debt. With a balance transfer card, you may even be able to secure a 0% intro APR offer for a year or more.

4. Consider Debt Payment Strategies

Being strategic about paying off debt can simplify a tough process. Two methods to consider are the debt snowball method and debt avalanche method. These methods are typically applied to credit card debt.

With the debt snowball method, you'll make minimum monthly payments on all of your accounts except the one with the smallest balance. Then, take the money you'd otherwise be paying toward your other debts and put as much as you can toward the smallest debt until it's wiped out. You'll then move on to the next smallest balance, and repeat the process until you've paid off all of your cards.

The debt avalanche method takes a similar approach, but with a twist. Under this method, you make minimum monthly payments on all of your accounts except the one with the highest interest rate. You then allocate as much money as you can toward erasing the highest-interest debt. Once that debt is gone, you move to the debt with the next highest interest rate, and so forth. This method will likely save you more money over the snowball approach, but it can be harder to stay motivated if your highest-interest debt has a high balance.

5. Seek Help

Do you feel like you're swimming in debt? If so, it may be time to ask for help.

One of those sources of help could be a credit counseling service. Debt counseling can help you better understand your finances and debt, and work with you to come up with a plan to achieve your goals. The National Foundation for Credit Counseling (NFCC) is a trusted source for finding a reputable credit counselor.

They may suggest a debt management plan, which would have you make a single monthly payment to the credit counseling service that's then distributed to your creditors. Keep in mind that you will still be responsible for making sure all payments are made on time, even if another company is making them on your behalf.

An alternative is debt settlement. A debt settlement company may be able to negotiate paying less than you owe to your creditors. However, settling your debts for less than the full amounts owed will have a negative impact on your credit scores, especially since debt settlement companies typically require you to stop making payments to your creditors. This should be a last-resort way to decrease debt.

If you're having trouble paying your bills due to financial difficulties, you can also seek financial assistance and access to programs that provide free or subsidized goods and services.

The Bottom Line

While there's no "get out of jail free" card for getting rid of debt, keep in mind that there are only a few instances when your debt could land you in jail. But if you feel stuck by debt, you can break free by setting in motion a plan to take care of it for good. As part of that plan, you'll want to view your free credit report and scores through Experian.