I sometimes get questions from our readers with questions and answers that seem to be so obvious. However, I get these same questions over and over again that apparently many people are not sure about it. The email I received from a reader illustrates this point:
“I was a gambler and a year ago I had personal problem in my life. I got so depressed that I almost committed suicide. Just because gambling helped to ease my depression I got hooked. I ended up with bills on my credit card for cash advances of $150,000 … and because the economy is so bad they cut our hours of work from full time I only work as a part time now… I was still paying for my bills until I cannot afford anymore because of working part time. I was thinking about filing for bankruptcy but I don’t want to get in trouble. I’d like to pay my bills but I cannot afford it anymore. Because of what I owe can I go to jail for that? I used to take home $4000 mo now I am lucky if I take home $2000 now. Sometimes it’s just enough or sometimes I’m still short. … Can I go to jail for that? …. If they garnish my paycheck, me and my son will be living in the street but I’m scared that they might put me in jail and who is gonna take care of my son. That’s why I’m scared to file bankruptcy. Please tell me more… “
This question is not very unusual as credit collectors oftentimes perpetuate this myth. Credit collectors do make calls to debtor’s place of employment or home numbers and leave threatening message. They try to intimidate debtors to pay up or threaten them with arrest or imprisonment.
Fortunately for debtors there are no debtor prisons in the US. There have been no debtor prisons in the US for the past 150 years. Some countries may still place a debtor in prison for failing to pay a debt. However, debt is not criminalized in the US. In order to go to prison you must be convicted of a criminal behavior. Failing to pay a debt is not a criminal behavior.
What will most likely happen with credit card debts is that the creditor will sue you in court to collect the obligation. Through this judgment the creditor can then garnish your wages or get liens on your properties. However, getting to this point is a very time-consuming and costly affair for the creditor. Hence, unless you owe a huge amount and/or you have assets they can run after, it is usually very costly for creditors to go to court to collect from debtors who have no assets. Specially, considering that debtors with no assets can easily file for bankruptcy and get rid of these debts anyway.
In case of secured obligations, such as a home mortgage or car loans, the creditor’s remedy is to foreclose on the home or repossess car. Creditors cannot put you to jail for failing to pay their secured obligations.
Many people have lost their jobs, have had unexpected medical problems, or just had financial investments gone bad. A debtor in such a situation who can no longer make the minimum payment is not a criminal and cannot go to jail for these reasons. Collection agencies, however, will do anything they can to compel payment from the debtor. You cannot go to jail if you cannot pay your financial obligations. That is precisely the reason why we have remedies available such as bankruptcy and debt settlements. If a debtor does nothing about it, the worse that will happen to the debtor is a ruined credit score!
