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Many have asked, can you go to jail for credit card debt, and we are here to answer that question. Recent statistics showed that 70% of people in the United States have a credit card, with over 30% carrying more than three cards.
This is because of the convenience that credit cards offer. Most people have one question whether they can go to jail for credit card debt.
But the number of people defaulting on credit card payments has also increased tremendously over the last decade.
According to Federal Report Data, credit card debt in the United States currently stands at $13.86 trillion, and it is estimated to hit $20 trillion by 2030.
If you feel ashamed for not being able to pay your credit card debt, please don’t because many Americans are right where you are.
The drastic increase in defaulters has many wondering whether people who cannot meet their credit card payment obligations can go to jail.
If you are one of them, you are in the right place today. This article will tell you everything you need to know about defaulting on credit card payment, including answering the question, can you go to jail for credit card debt. Make sure you read until the end so that you don’t miss out on anything.
Can You Go to Jail for Credit Card Debt?
No, you cannot go to jail for credit card debt. Not being able to meet your credit card payment obligation can make you worried and anxious.
However, you should not worry about serving a jail term for not being able to pay off your credit card debt.
If you have defaulted on payment of your credit card loan for months now, you should not worry that the police will come to arrest you.
Most creditors usually call and threaten defaulters of a lengthy jail term to instill fear and force them to pay off the debt.
However, the truth is that they have no legal authority to arrest individuals who have defaulted on credit card payments.
In fact, creditors who threaten their customers that they will be jailed for defaulting on their credit card debt are breaking federal law.
The Fair Debt Collection Practice Act prohibits debt collectors from threatening credit card defaulters with jail time or prosecution, and if they do so, they are going against the law.
If this happens to you, you can take legal action against the creditor. Most people have gone into depression because of constant phone calls from creditors threatening them.
Some debt collectors go as far as threatening arrest if the debt is not cleared within a specific period.
If that is the case with you, don’t be intimidated anymore because you will not be arrested.
What Happens if You Default on Your Credit Card Debt?
Now that you know you will not be arrested for credit card debt, you may be wondering what will happen if you have credit card debt.
Below is a list of things that will happen if you default on credit card debt payments:
Late fees and high interest
If you default on paying your credit card debt for one or two months, a late fee will be added to your account. Additionally, your minimum monthly repayments will increase due to the increased interest rate.
Referred to collection accounts
If you default on your credit card debt, the creditor may refer you to a collection agency. The debt collector will call you repeatedly, urging you to pay the debt.
They will also send you multiple letters demanding that you clear the debt. This turn of events can be embarrassing and stressful.
Your credit score will decrease
Making it more difficult for you to borrow loans, get a job, and even buy or rent a house. If you default on your credit card payments, your credit score will reduce, and a notice of default sent to the three major credit bureaus.
The three major credit bureaus include Experian, TransUnion, and Equifax, which will lower your credit score by hundreds of points.
Decrease in credit limit
Creditors will see you as a risky borrower when you default on credit card payments, lowering your credit card limit.
This means that the amount you will receive when borrowing is significantly lower than what you could have received if you had not defaulted on your credit card payments.
Legal action
Though you won’t go to jail for not paying credit card debt, creditors can take civil action for unpaid debts.
This means that the court could have your bank accounts frozen, your wages garnished, a lien put against your house, or any valuable asset is taken away from you.
If a lawsuit is filed against you, the best option is to honor the court summons and discuss how to repay the debt. If you don’t respond to court judgment, you will lose the case, resulting in forced debt recovery.
What Kind of Debt Can You Go to Jail For?
You must have heard of people going to jail because of defaulting on debts. So, what kinds of debts can you go to jail for defaulting?
There are two instances where you can go to jail if you default on paying the debt. They include child support payments and federal taxes.
If you purposefully refuse to pay taxes, you can go to jail. It is a crime not to pay tax in the United States. You may also land in jail if you fail to file your taxes or enter incorrect information on your taxes.
Note: You will not be put in jail if you fail to pay your taxes due to financial hardship.
You will only land in prison if you purposefully fail to pay your federal taxes. You may also land in jail if you don’t pay your monthly child support payments.
It is against federal law to default on child support. In fact, those who default risk being jailed for up to two years.
Final Thoughts
If you have defaulted on your credit card payments and threatened to be jailed; remember they are just threats, and no legal action can be taken against you
You cannot go to jail for defaulting on credit card payments. The only debts that can land you in jail are federal taxes and child support payments.