Can You Go to Jail for a Payday Loan? The Truth

About 12 million Americans use payday loans every year. These loans offer quick cash when you need it most.

However, payday loans come with sky-high interest rates. Many borrowers struggle to repay them on time.

Don't Let a Payday Loan Lawsuit Lead to Arrest

Ignoring a court summons can result in a warrant for your arrest and wage garnishment. Respond to your payday loan lawsuit now and protect your rights.

File Your Answer

You might wonder what happens if you can’t pay. Could you actually go to jail?

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

No, you cannot go to jail for owing a payday loan. Debtors’ prisons are illegal in the United States.

However, you can be arrested for contempt of court. This happens if you ignore a court summons.

Here’s how it works. A payday lender sues you for the debt. The court sends you a summons to appear. You ignore the summons and miss your court date.

The lender’s attorney requests a warrant for your arrest. The judge issues the warrant for contempt of court. You get arrested for defying the court’s order.

CNBC reported cases of people arrested after falling behind on payday loans. ProPublica documented consumers spending days in jail for payday loan debt. In every case, the arrest came from missing court appearances.

Most states make it illegal to threaten borrowers with arrest. Debt collectors who make these threats violate federal law.

Can a Payday Lender Sue You?

Yes, payday lenders can sue you for unpaid debt. They file lawsuits in civil court, not criminal court.

Many lenders threaten lawsuits but never follow through. Filing a lawsuit costs money in legal fees. Most lenders prefer to negotiate a settlement instead.

When lenders do sue, they often win by default. Many borrowers ignore the summons and don’t respond. The court automatically rules in the lender’s favor.

A default judgment allows the lender to garnish your wages. Your employer must send part of your paycheck to the lender. You can prevent this by responding to the lawsuit.

Our partner Solo helps you respond to payday loan lawsuits. You can file an attorney-approved Answer to the court.

How to Deal with Debt Collectors

Debt collectors start calling when you default on a payday loan. Some make threats and harass you daily.

The Fair Debt Collection Practices Act (FDCPA) protects you. Debt collectors cannot legally do the following:

Harass you or make threats of arrest
Call you before 8 a.m. or after 9 p.m.
Share your debt information with family or friends
Lie or provide misleading information
Report false information to credit bureaus
Sue you for time-barred debt

You can fight back against abusive debt collectors. Take these steps to protect yourself:

File a complaint with your state’s attorney general
Report them to your state’s consumer protection office
Submit a complaint to the Consumer Financial Protection Bureau
Report violations to the Federal Trade Commission
Write a review on their Better Business Bureau profile

These agencies investigate complaints and take action against violators. Your complaint creates a record of their illegal behavior.

Real-Life Example

Bill owed $920 to Horizon Gold for credit card debt. After one year of nonpayment, he received multiple daily calls.

He requested written communication only. The agent threatened him with arrest instead.

Bill sent a Debt Validation Letter requesting proof of the debt. Horizon Gold never responded to his request.

He reported them to the CFPB and Better Business Bureau. The CFPB required Horizon Gold to respond to Bill’s complaints.

Horizon Gold apologized and offered to settle for 50% of the debt. Bill countered with 30%, and they agreed. He paid the settlement and reported the matter resolved.

Send a Debt Validation Letter

Debt collectors must validate the debt within five days of contacting you. The FDCPA requires them to provide five key pieces of information:

The amount you owe
The name of the original creditor
Notice that the debt is assumed valid unless you dispute it
Confirmation that they’ll send validation if you request it
The original creditor’s name and address upon request

You have 30 days to send a Debt Validation Letter. The collector must stop collection efforts until they validate the debt.

If they fail to provide the required information, they’ve violated the FDCPA. You can sue them for $1,000 or more in damages.

What to Do If You Cannot Pay

You have options if you can’t repay your payday loan. Consider these strategies before the situation gets worse.

Negotiate with the Lender

Many payday lenders will negotiate a payment plan. You might pay less than the full amount owed.

Offer to pay what you can afford. Request forgiveness of the remaining balance in exchange.

Get any agreement in writing before you pay. Written agreements protect you if disputes arise later.

The lender isn’t required to negotiate with you. Some refuse to settle for less than full payment.

Check Your State’s Statute of Limitations

Every state has a statute of limitations on debt collection. This law limits how long creditors can sue you.

Once the statute expires, the debt becomes legally uncollectible. The lender cannot take you to court for the debt.

The time limit varies by state and debt type. Medical debt typically has shorter time limits than loans.

Research your state’s statute of limitations for payday loans. Your debt might already be too old to collect.

Consider Bankruptcy

Bankruptcy stops all collection efforts immediately. Payday loans are unsecured debts that can be discharged.

You can file Chapter 7 or Chapter 13 bankruptcy. Speak with a bankruptcy attorney for free to understand your options.

Chapter 7 eliminates most unsecured debts within months. Chapter 13 creates a repayment plan over three to five years.

Bankruptcy seriously impacts your credit score. Consider it only after exploring other options.

Protect Yourself from Payday Loan Problems

Never ignore a court summons for any reason. Ignoring the summons can lead to arrest and wage garnishment.

Respond to lawsuits as soon as you receive them. Our partner Solo makes it easy to file your Answer.

You can create an attorney-approved response in minutes. Don’t let payday lenders win by default.

Know your rights under the FDCPA. Debt collectors must follow strict rules when contacting you.

Document every interaction with debt collectors. Keep records of calls, letters, and threats they make.

You have more power than you think. Take action to protect yourself from abusive collection practices.

Frequently Asked Questions

Can you be arrested for not paying a payday loan?

No, you cannot be arrested for owing a payday loan. However, you can be arrested for contempt of court if you ignore a lawsuit summons and miss your court date. Always respond to court documents to avoid arrest.

What happens if I ignore a payday loan lawsuit?

If you ignore a payday loan lawsuit, the court will issue a default judgment against you. The lender can then garnish your wages, freeze your bank account, or place a lien on your property. Always respond to lawsuits within the deadline.

Can payday lenders threaten me with jail time?

No, it is illegal for payday lenders or debt collectors to threaten you with arrest or jail time. This violates the Fair Debt Collection Practices Act. Report any threats to the Consumer Financial Protection Bureau and your state attorney general.

How do I respond to a payday loan lawsuit?

You must file an Answer with the court within the deadline stated in your summons, typically 20-30 days. The Answer should address each claim in the lawsuit and present your defenses. You can use online tools to create an attorney-approved Answer quickly.

What should I do if I cannot afford to pay my payday loan?

You have several options: negotiate a settlement with the lender, check if your state's statute of limitations has expired, send a debt validation letter, or consult with a bankruptcy attorney about Chapter 7 or Chapter 13 bankruptcy.