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Can You Go to Jail for Not Paying a Personal Loan?

Can You Go to Jail for Not Paying a Loan?
Matthew Warholak
Matthew WarholakUpdated February 23, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
If you’re in debt, and you’re falling behind on payments on a personal loan, you’re probably worried about what might happen to you. You may even be asking yourself, Can you go to jail for not paying a loan?Take a breath. You can’t be sent to jail specifically for failing to repay a personal loan. You could be sued by a creditor, however, and if you don’t show up in court or you fail to make payments ordered by a judge, you could face jail time for that infraction. While you can’t be jailed for not paying a loan, there are other potentially severe consequences you might face. For instance, your credit score could be seriously damaged, and your wages might be garnished. Rather than stopping payment altogether and trying to ignore the debt, there are methods that can help you get a handle on what you owe. Here’s what you need to know about dealing with debt — plus what to do if a creditor threatens you with arrest or jail time.

When Can You Go to Jail for Not Paying a Loan? 

Can you go to jail for not paying a personal loan? No, you can’t be jailed if you don’t pay back a personal loan. Having personal loans explained can help you understand how they work. However, there are instances when failure to pay a certain type of debt could lead to jail. These include: 

Federal Debt

Refusing to pay federal income taxes, which is known as tax evasion, is a crime and could result in jail time.  

Court Fees 

If you are taken to court for a debt, the judge could order you to pay court fees related to your case, such as filing fees. If you refuse to pay those fees, you may be held in contempt of court for violating the court order and possibly even jailed. Contempt of court is a crime.

Child Support

Child support is a court-ordered payment. If you fail to make these payments, you could be held in contempt of court and potentially face jail time. Recommended: How to Bail Someone Out of Jail Using a Personal Loan

Receiving Threats of Being Jailed for Not Paying a Loan

As we’ve established, you can’t be jailed if you default on a personal loan. However, if a creditor or debt collector is threatening to send you to jail for paying a debt, there are actions you can take to protect yourself. 

Understand Your Rights

Debt collectors may sometimes use aggressive tactics to get you to pay what you owe. They might even threaten you with arrest or jail time. Under the Fair Debt Collection Practices Act (FDCPA), debt collectors cannot threaten or harass you. If this is happening to you, take notes about every call, email, text, or letter you receive from the debt collector, including any abusive, harassing, or threatening behavior. Keep all the written communications they send you. Be sure to include the time of day they called you — debt collectors are prohibited from calling before 8 am or after 9 pm. Then, file a complaint with the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), or your state attorney general’s office

Find Out What Your Local Laws Are

Some cities and states also have regulations on debt collection. Find out about any such regulations in your area (check with your local government office and your state attorney general’s office), and if the creditor pursuing you is in violation, you may be able to take action against them.

Write a Letter 

You can send the debt collector a letter asking them to stop contacting you. Once they receive such a request from you, debt collectors must obey it, according to FDCPA rules. After that, the only time they can contact you is to inform you that they will stop contacting you or that they’re taking action against you. Recommended: Guide to Deferring Personal Loan Payments

In Which States Can You Go to Jail for Not Paying a Loan?

Can you go to jail for not paying a loan back? No. However, while the laws vary in different states, there are approximately 26 states in which you could be charged with contempt of court connected to not paying a debt, such as a loan. For instance, this could happen if you are sued for the debt you owe, and you fail to show up in court as ordered, or if you don’t make payments ordered by a judge. The criminal offense is failure to comply with a court summons or court order. Although the laws may vary, in general, the 26 states where you could face jail time for contempt of court for this are:ArizonaArkansasCaliforniaColoradoFloridaGeorgiaIdahoIllinoisIndianaKansasLouisianaMarylandMassachusettsMichiganMinnesotaMissouriNebraskaOhioOregonPennsylvaniaRhode IslandTennesseeTexasUtahWashingtonWisconsin

Tips for Paying off Your Debt 

Paying what you owe could help you manage your debt and avoid debt collectors. The following strategies may help.

Determine Exactly What You Owe 

Sit down with all your bills and accounts and figure out exactly how much you owe and to whom. Include any fees and additional interest you’re being charged.

Communicate With the Lenders 

Contact your creditors, or respond to their outreach to you, and tell them you’d like to pay off your debt. Explain any financial difficulties you are having, and see if you can work out an affordable payment plan with them. Tell them what you can pay each month. Ask if they could excuse any late fees or additional interest charges. Creditors may be willing to work with you because at least they will be recouping some of their money. If they agree to a new repayment plan, be sure to get the details in writing. And take notes to document everything on your end.

Consider Consulting a Debt Management Advisor 

A credit counselor or debt management advisor at a nonprofit credit counseling agency may be able to help you take control of your debt if it’s too overwhelming to deal with on your own. These professionals could help you negotiate your debt with creditors and create affordable payment plans. You may have to pay a small monthly fee for this service — generally $25 to $50. With debt management, you can generally get out of debt in three to five years. To find a credit counseling agency, you can contact the National Foundation for Credit Counseling.The U.S. Department of Justice also has a list of approved credit counseling agencies.

Consider Consolidating Debt 

If you have a number of different debts with different lenders, it can be tough to juggle them all. That’s when debt consolidation loans may come in handy. By consolidating your debt into one larger loan, you could pay off all your existing debts and then focus on one payment that’s easier to manage. Just be aware that debt consolidation loans may have longer loan terms. The longer the loan lasts, the more interest you will pay. It may be worth it to get your debt under control, but take that into consideration. You might also want to explore the difference between a debt consolidation loan vs. personal loan to decide what might be a better option for you. As you’re doing that, it might be helpful to know what is required for a personal loan.

The Takeaway

Failure to repay a loan won’t typically result in jail time, but it could cause debt collectors to pursue you for payment. You may end up owing even more in fees and additional interest charges. Plus, your credit score will take a major hit, and your wages could be garnished. And if the debt collector sues you and you fail to respond to a court order, you could be charged with contempt of court, which is a crime.Fortunately, there are ways to avoid this and get your debt under control. You may be able to negotiate an affordable payment plan with the creditor or work with a debt management advisor who can help you get out of debt. You might also consider a loan consolidation. Once you figure out the right course of action, you could start to take charge of your financial life again.

3 Personal Loan Tips

  1. Shopping around helps ensure that you’re getting the best deal you can. Lantern by SoFi makes this easy. With one online application, you can find and compare personal loan offers from multiple lenders.
  2. Read lender reviews before taking out a personal loan. You’ll get a sense of how long it can take to receive the funds and how good the customer service is.
  3. Don’t assume that if you have bad credit, you can’t get a personal loan. There are lenders who specialize in bad credit loans.

Frequently Asked Questions

Is it possible to go to jail for not paying back a personal loan?
What states can you go to jail for not paying back a personal loan?
What happens when you do not pay back a personal loan?
Photo credit: iStock/ljubaphoto

About the Author

Matthew Warholak

Matthew Warholak

Matt Warholak is a US-based financial writer and personal finance specialist with 7+ years in video, podcasts, and online content. His work has appeared on websites including BlockFi, iGrad, iTrust Capital, BlockWorks, Market Disruptors, CryptoEQ, and more. Matt has a degree from SUNY Plattsburgh.
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