Can I go to Jail for Unpaid Debt?
I have accumulated a lot of credit card debt and have fallen behind on my payments. I’m doing my best, but I can’t keep up. I’m starting to get calls from collection agencies and I’m getting worried. What’s going to happen to me if I can’t pay my debt? They’ve been talking about garnishing my wages. I’m worried that I might lose my job. I’ve heard that I could even end up going to jail if I can’t come up with the money. Is that true?
Matt S, Montreal, QC
Let’s put your mind to rest straight away. The short answer is no – you cannot go to jail if you don’t pay your debt. There is no such thing as “debtor prison”.
When you take out a credit card, you sign a contract with the creditor agreeing to pay back the money that you owe. If you default on these payments, you are breaking the contract, which means that the creditor can take action against you in other ways – and this is usually done through the courts. However, the court proceedings are civil, not criminal, so you wouldn’t go to jail.
If you are unable to pay your credit cards, the creditor may seek a judgement against you in civil court. They may be allowed to garnish your wages, put a lien on your home or repossess assets (if the debt was secured) to pay the balance that you owe.
There are rules that vary from province to province about how much and what type of income/wages are allowed to be garnished. The idea is not to leave a debtor destitute, but for creditors to be able to reclaim the money that you owe them. There are also rules in many cases that prevent you from being dismissed from your job while your wages are being garnished.
You also have rights as to how they can collect, there are also rules and regulations in place that outline how and when a creditor is allowed to contact you. It can help you manage your stress, as well as understand what your options are if you know what your rights are; it can also help you determine if there is truth behind threats being made to you by creditors trying to collect their debts- For example, jail time, job loss and wage garnishment fall into that category-you just need to know what is truth and what is myth.
While you do not go to jail if you don’t pay your credit cards, there is no doubt that dealing with credit card debt is a prison of its own. The more debt you have, the more limited your options become and you feel trapped, much like you would be in a literal jail.
Why not avoid that feeling of being trapped by taking charge of your debt today? Many people don’t realize that there are debt solutions out there that can help pay down your debt and provide valuable tools to help you stay out of debt in the future. Depending on your financial situation, you may even be able to salvage your credit rating. It’s worth checking out!
Jeffrey Schwartz is the Executive Director of Consolidated Credit Counseling Services of Canada and past President of the Credit Association of Greater Toronto (CAGT).