Based on data from the Federal Reserve Bank of New York, the Quarterly Report on Household Debt and Credit of 2022 shows a solid increase in total household debt of $266 billion, reaching a whopping $15.84 trillion. Credit card balances are $71 billion higher than in 2021, unlike balances on home equity lines of credit (HELOC) that have remained relatively flat for the past 3 quarters [1]. This suggests that Americans are currently charging more on their credit cards and taking out fewer mortgages, as they increasingly find themselves in need of borrowing to cover the higher cost of everyday essentials and respond to rising interest rates.
Are you one of the millions of Americans dealing with credit card debt that is becoming hard to manage? Have you been receiving letters and repeated phone calls from collection agencies using aggressive tactics to intimidate you into paying, including threatening jail time? If so, you are perhaps wondering whether you can, indeed, end up in jail for credit card debt.
Being in a situation where your financial arrears are becoming overwhelming is one of the most stressful positions to be in—and one where getting solid, professional advice is highly recommended. Arranging a free initial consultation with our legal team at Roemerman law will let you receive a clear overview of your options. Give us a call to raise any questions and concerns you may have and, most importantly, find out how we can assist you to deal with the financial challenges you are facing!
See Article: Debt Settlement In New York
Credit Card Debt and Debt Collection Attempts
One thing that must be made clear is that tactics involving the intimidation of debtors, including the use of threats on the part of debt collectors of “sending you to jail” etc., are generally prohibited. The federal Fair Debt Collection Practices Act (FDCPA) [2], enacted by Congress in 1978 precisely because of “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors,” protects consumers by limiting the actions of third-party debt collectors. The FDCPA covers the collection of mortgage, credit card, and medical debts, as well as various other debts associated with personal, family, or household purposes. Its key significance is that it includes various rules on when, how, and how often a third-party debt collector can contact a debtor and sets limits on who else the debt collector is allowed to contact.
Therefore, even though you may still be having the unpleasant experience of being contacted by a collection agency or similar entity, you do have certain rights as a consumer. Those contacting you for debt collection are under an obligation to follow a certain process, which renders them accountable if they overstep the lines set by the law. Additionally, the federal Fair Credit Reporting Act (FCRA) [3] also sets important rules concerning how financial matters, including debt collections, can be reported in your credit report. Other state and federal consumer financial protection laws are also in place, prohibiting unfair, deceptive, or abusive acts or practices. These laws apply to both debt collectors and creditors.
Besides the federal Fair Debt Collection Practices Act, consumers in New York also have the added protection of the New York State Consumer Credit Fairness Act. This covers consumers facing debt-collection lawsuits. Therefore, if you have been the recipient of bold and deceptive claims aimed to scare you into paying your credit card debt, there are actions you can take to address this matter. Turning to an experienced professional for related advice would be the best thing to do.
Can You Spend Time in Prison for Credit Card Debt?
So-called “debtors’ prisons”, meaning prisons for people unable to pay their debts, used to be a common form of punishment for unpaid debts in the USA until they gradually became less and less popular in the 19th century. In 1833, the imprisonment of debtors was ostensibly eliminated under federal law, leaving the practice of debtors’ prisons to each state.
In view of the reforms that have taken place, the short and general answer to the question “Can I go to jail if I fail to pay my credit card debt?” is “No”. This also holds true for most civil debts, although it must be pointed out that you may still be arrested for failing to pay certain debts, such as court fees and fines, child support, and tax debt. Most importantly, even though it is true that you will not be facing jail time for failing to pay your credit card debt as such, ending up being arrested as a consequence of credit card debt is not entirely impossible.
So, What’s the Worst That Can Happen?
If you feel that managing your credit card bills has become a struggle, you must keep in mind the likely consequences that typically accompany missing payments. Failing to make monthly payments means that you will inevitably end up being charged late fees and, should you miss more than a few consecutive credit card payments, you will default on your credit card debt. In all probability, this will then lead to all kinds of other adverse effects for you, such as having to face higher interest rates, negative information attached to your credit report for up to 7 years, as well as a lowered credit score.
At the same time, and although you can’t be charged with a criminal act for not paying your credit card debt, it is possible that you may be taken to civil court by your creditors/debt collectors to get a judgment in their favor. This judgment will order you to pay your debt, usually through wage garnishment and/or a bank account levy. In the first case, a part of your earnings will be taken out of your paycheck without requiring your approval and will be used to pay back the party who obtained the judgment against you. As for bank account levies, they allow the withdrawal of funds from your bank account, without your permission, for the repayment of your debt.
In the event you are sued by a creditor or collection agency, it is crucial that you actively defend the debt collection lawsuit brought against you. Failing to do so will in all probability lead to the issuance of a court order in favor of the party that is suing you. If you are facing spiraling debt and find yourself in serious economic arrears, you need to pay close attention to all your mail and messages, making sure that you appear in court if you receive a notice requiring you to attend a hearing concerning your debt.
This may seem like a daunting prospect, but it will be in your best interest not to ignore such notices and fight against any debt collection lawsuit as soon as possible after finding out about it. If you let your creditors get a judgment against you, there may still be ways to address it, but things will be more complicated at that stage. In any case, seek advice from a debt consultation lawyer sooner rather than later if you find yourself having trouble managing your debts. They will help you gain a better picture of your situation, obligations, and available options.
Once a debt collection judgment is issued against you by the court, missing a payment or failing to follow the steps outlined therewith opens up the possibility of you being held in contempt of court. This could—at least in theory—end with you being sent to jail! In other words, if you don’t fulfill the requirements of the judgment issued against you, you could be arrested for violating the court order and end up spending time in jail. This is quite a rare occurrence that requires both an aggressive creditor and a willing court, but it cannot be excluded altogether. Therefore, if your credit card debt is getting out of hand and you fear you may be facing court action by your creditor(s), consider exploring other options, such as filing for bankruptcy.
Bankruptcy and Credit Card Debt
According to America’s Debt Help Organization, credit-card debt soared and reached its all-time peak in July 2008, exceeding $1 trillion. This was shortly after the Bankruptcy Protection Act of 2005 was passed [5], which made it harder for people to file for bankruptcy. Even so, depending on your circumstances, filing for bankruptcy may well be the best option for you in terms of getting back on track financially, and one worth exploring if you find yourself drowning in credit card debt.
The main benefit of filing bankruptcy is the protection you will have under the automatic stay, also known as a “bankruptcy stay ”. This is one of the most powerful tools provided by bankruptcy and is initiated as soon you submit your bankruptcy petition to the court. A bankruptcy stay halts any actions by creditors to collect your debts, including credit card companies. This grants you some valuable extra time to sort out your finances without being harassed by collection attempts.
Bankruptcy can be a life-changing decision if your goal is to get a restart on your finances, even though it is a decision that is not to be taken lightly. Provided you qualify for filing either under Chapter 7 or Chapter 13, the main added benefit of bankruptcy is that it typically ends in discharge. If you are able to file under Chapter 7, the success rate for discharging unsecured debts (including those arising from credit cards) is an astonishing 95.3% [6]. Filing under Chapter 13 may also mean that part (if not all) your credit card debt is discharged. The question of what portion of your credit card debt you will end up having to pay through your Chapter 13 bankruptcy plan will depend on various factors, but it is useful to bear in mind that the amount that will be left at the end of your repayment period is often discharged.
Contact Roemerman Law
Not everyone qualifies for Chapter 7 or Chapter 13 bankruptcy. Additionally, you need to take into account certain repercussions of having credit card debt discharged. Even so, help is available if you are unable to keep up with the payment of your bills and your debt seems to be getting out of hand.
Our friendly, experienced legal team can examine your financial situation in confidence and help you determine the best course of action to address your debt problems. Click here to learn about qualifying for a NY bankruptcy or contact Roemerman Law today for a free initial consultation and find out about your options.
References
[1] https://www.newyorkfed.org/microeconomics/hhdc
[2] https://www.law.cornell.edu/uscode/text/15/chapter-41/subchapter-V
[3] https://www.ecfr.gov/current/title-16/chapter-I/subchapter-F
[4] https://www.debt.org/faqs/americans-in-debt/
[5] https://www.congress.gov/bill/109th-congress/senate-bill/256/text
[6] https://www.debt.org/bankruptcy/file-bankruptcy-for-credit-card-debt/
