Skip to content
Download Consolidated Credit's Free Debt Relief Guide

Can You Go to Jail for Not Paying Debt?

Debt collectors are finding ways to send you to jail

Wondering whether you can go to jail for not paying debt? Debtors’ prison is not supposed to be something you have to worry about in Canada these days. The practice of sending people to jail over unpaid debts was abolished over two centuries ago. There shouldn’t be any reason you end up in criminal court over any kind of debt… except possible debts owed to the government in the form of criminal court fees.

Unfortunately, it seems like debt collectors are finding ways to get around these restrictions. A man was arrested over an unpaid $1,500 bill for a student loan debt from over thirty years ago.  What’s more, a report from NerdWallet seems to indicate this isn’t an isolated incident. It could potentially happen with any debt, including one incurred with a credit card.

The practice is definitely underhanded, but is it illegal?

Again, keep in mind that debtors’ prison is supposed to be abolished. Even the mere act of a collector threatening you with jail time is supposed to be against the law. Just for saying you could go to jail over a debt a collector is supposed to be open to face a civil suit. You could receive cash compensation for being threatened.

So what gives?

Debt collectors have found ways to exploit a loophole in the system so people can get arrested over a debt.

Here’s how it works:

  1. You have an unpaid debt that the original creditor charges off and sells to a third-party debt collector.
  2. That collector attempts to collect but you either dodge them or don’t pay because you don’t have the funds.
  3. As a result, the collector files a civil suit against you in your state’s court system.
  4. In many cases, you may not even know you’re being sued. Nevertheless, you fail to appear at the hearing – something that according to NerdWallet’s report happens about 90% of the time a default judgment is entered against you.
  5. Order can then be used to obtain wage garnishment and bank liens by the collector to get you to pay

Sneaky, sneaky collectors. Because they often use tactics like “sewer service” which refers to the practice of or literally throwing collection notices and court summons into the sewer instead of serving the debtor as required by law.

“If disreputable debt collectors are going to use tricks like this to turn civil matters into criminal, then the laws need to be amended to close loopholes that can put hardworking families at risk of jail time,” says Jeff Schwartz, Executive Director at Consolidated Credit. “Without a doubt, people should make every effort to pay what they owe, but if you lose your job and can’t pay back a debt, you shouldn’t have to fear being put in jail alongside hardened criminals.”

Take action to protect yourself now

The laws will be changed to close these loopholes and make it impossible for debt collectors to have you jailed.

Unfortunately, even if lawmakers decide to create a new law that closes the loophole, it could take several years. In the meantime, this practice can continue until it’s outlawed.

“If you have an unpaid debt, you can’t just ignore it because now, depending on where you live, you might have a warrant issued for your arrest as a result,” Jeff explains. “So even if you can’t pay the debt back, you need to do something – even if that something is filing for bankruptcy. After all, bankruptcy is definitely not the worst thing that can happen in a world where you could be confronted over an unpaid debt.”

If you have a debt in collections, you need to take action. Here is what you can do:

Make sure the debt is actually yours. 

Debt collectors are notorious for pegging the wrong person as the debtor who owes the balance they’re trying to collect. Also, make sure the debt amount is correct.

If it’s not yours, give them notice top stop contacting you. 

By law, you can inform the collector that the debt they’re owed is not yours and you no longer wish to be contacted. Note the date and time of any phone conversations. You may also want to send a registered letter so you have proof that you notified them in case you need to prove it in court later.

If it is your debt to pay, explore relief options. 

For credit card debt, even if a debt is in collections you can still go through credit counselling to see if it can be included in a debt management program. In fact, even if you’re being sued already, consolidation may still work for you. Note that a debt management program has been shown to reduce qualifying debtor’s total monthly payments by 30-50 percent. Hardship programs for student loan debt consolidation can lower your payments to 10 percent of your income. If you’re below the Federal Poverty Line, you may not have to pay anything until you have the income.

If all else fails, file for bankruptcy. 

Particularly for things like medical debt and credit card debt, filing for bankruptcy allows the courts to either arrange a repayment schedule you can afford or discharge remaining balances if you are without the means to pay what you owe. Filing means you go to court on your terms instead of the collector’s terms. Once you have the court order you’d be protected from further legal action relating to the same debt. The worst thing you’ll have to face is a ten-year negative remark on your credit.

One potential downside is that federal student loans and even private student loans can’t be discharged during bankruptcy. However, discharging other debts may give you the means to make payments on your student loans so you can regain control. Otherwise, your best option may be federal loan consolidation – especially if you’re out of work completely or have limited income.  

If you have more questions regarding whether you can go to jail for not paying debt, it’s understandable. Owing to the government or child support without the ability to pay can be unsettling. or you need help determining what your best path out of debt really is in your unique financial situation, we can help. Call Consolidated Credit today at (844)-402-3073 to speak to a credit counsellor. There’s no charge for the consultation. You won’t incur another bill that has to be paid back for getting the one-on-one advice.

What is your total credit card debt amount?

Provide a few details about yourself.

##first_name##, here are your next steps...

Get a clear picture of your spending vs. your income. Begin your online budget and financial analysis now by clicking the button above.

Our experts are here to help you understand your options and reach your goals. After you complete the easy-to-use online budget, one of our trained counsellors will reach out to you and provide recommendations.

Everything shared is 100% confidential and secure.

I understand and agree that by choosing “Start your online budget now”, I am voluntarily providing certain personal financial information in order to educate myself as to my current financial position. I understand that this budget tool is educational in nature, and that none of the information received in the form of a budget constitutes financial advice, nor does it constitute a counselling session. I understand and agree that the budget depends on the information I input into the fields, and that Company does not represent or guarantee the accuracy of the budget. I understand that this tool may collect information and should I choose not to provide such information, I am not to proceed further. If I choose to abandon the tool midway through the process, I understand that the information will not be maintained and I would be required to start providing the information from the beginning. Company disclaims all warranties associated with the budget tool herein. I understand and agree that Company may use the contact information provided herein to contact me through various means of communications, including automated messages, and that I expressly consent to receive these messages.

Consolidated Credit Counseling Services of Canada Inc BBB accredited business profile