Can You Be Arrested for Not Paying Unsecured Debt?

In the United States, you cannot be arrested for failing to pay your debts whether secured or unsecured. Creditors can sue you for the balance you owe on the debt, but the court will not issue a bench warrant for your arrest if it finds in favor of the creditor.

Secured and Unsecured Debt

Secured debt is debt in which the creditor holds property as collateral. If you fail to make your payments to the creditor, the creditor has the right to repossess the property such as a vehicle or foreclose on your home. With unsecured debt, the creditor does not hold any property as collateral. If you fail to make your payments, the only recourse the creditor has is to sell your debt to a collection agency or file a civil lawsuit against you.

Creditor Lawsuits

When a creditor takes you to court in an effort to collect the remaining unpaid balance on your account, it is a civil lawsuit. In civil lawsuits, there is no violation of criminal laws. Therefore, if the court rules against you, you will not face any jail time. The purpose of such a lawsuit is for the creditor to recovery monetary damages from you. The monetary damage a creditor typically seeks to recover is the unpaid balance on your credit account.

Wage Garnishments

If the civil court judge finds in favor of the creditor, you have the option to pay off your outstanding balance in full. If you cannot afford to pay off your balance in full, the creditor will garnish your wages. The creditor can garnish up to 25 percent of your after-tax wages until you pay off the outstanding balance on your account. However, if your after-tax earnings total less than 30 times the current federal minimum wage, the creditor cannot garnish any of your wages.

State Income Tax Return Intercept

If the creditor cannot garnish your wages, it will submit a request to the court to intercept your state income tax return check. Your state taxing agency will intercept your state tax return check and will deduct the amount you owe to the creditor. If the refund check is less than what you owe, the taxing agency will send the entire check to the creditor. If the refund check is more than what you owe, the state taxing agency will deduct what you owe to the creditor and send the remaining money from your refund check to you.