Can You Go to Jail for Not Paying Payday Loans in Texas?

No, you can't be arrested for not paying a payday loan. However, if you are sued or a court ruling is handed down against you and you ignore a court order to appear, a judge can issue an arrest warrant against you. In recent years, “payday loans” have become increasingly popular in the United States, including the state of Texas. For a variety of reasons, the rates at which borrowers fail to repay these loans are extremely high.

If you haven't paid off a quick loan or are worried that you won't be able to pay it in the near future, you may worry about going to jail for not paying the loan. You won't go to jail if you don't pay a “quick loan”. The law in the United States is very clear: debtors cannot be imprisoned for not paying a debt. Our bankruptcy laws are federal laws that allow debtors to file for bankruptcy protection when they can't pay their debts. In addition, debt collection is a matter of civil law, not a criminal one.

A creditor can request the collection of a debt through the civil courts of the United States; however, debtors cannot be prosecuted in criminal court for failing to pay a debt. The creditor (the payday loan company) certainly has the right to request repayment using legal methods of collection, including filing a small claim against the debtor. However, they are actually trying to collect the debt by calling you day and night, to work or to your house. If you deposit your check later and it “bounces back”, or if there aren't enough funds in your account when the payday lender tries to repay itself, the payday lender may tell you that you've committed a crime and that you're going to be arrested. A creditor can't put you in jail.

Attorneys can pursue you if they believe you have committed a crime. However, virtually all prosecutors know that not paying a quick loan is not a crime, and they won't even try to prosecute you. In fact, most payday lenders know that prosecutors don't have time for a payday lender to use state offices to collect their debts and crazy interest rates, and they don't even contact them. They will threaten to contact them in an attempt to scare you into paying. I've even seen Payday lenders lie and claim to be “Investigator Jones” to scare the debtor into paying off a debt.

It's not a crime not to pay a quick loan. If you're concerned that a payday loan is in default, bankruptcy may be the best solution. Filing for bankruptcy will not only immediately stop all collection efforts by creditors, but it can also eliminate most of your debt and give you a fresh start. You can't go to jail for not paying a payday loan. However, you can be sentenced to prison if you fail to appear in court or ignore a court summons. Be proactive and make sure you're there and fully prepared for any court challenge.

Better yet, work with your lender first to avoid any court subpoena in the first place. Technically, you can't go to jail for an unpaid payday loan or for some type of debt. Not paying a quick loan is not a crime. Because of this, many borrowers are often stunned when they receive an arrest warrant. The statute also explains what is meant by effective consent.

You can read Chapter 31 of the Texas Penal Code if you're curious, but basically, if you lie or make other false statements (e.g., perhaps a pattern of applying for and not paying payday loans could suggest a lack of intention to repay the loans), then this could constitute effective consent. While applying for a quick loan may seem like a quick solution to a temporary cash deficit, in most cases it causes borrowers to borrow even more. With his bank account empty and hoping to avoid overdraft fees, Tillman suspended the automatic withdrawals he had set up for monthly payments on his payday loans. Tillman took out more payday loans to pay off the original loan and soon found himself with increasing debt. The Texas Consumer Services Alliance, a trade association that represents 80 percent of Texas payday loan and title companies, is even stricter when it comes to this practice. Even if you only have a small amount of debt, payday lenders use the small claims court system to recover money from their borrowers who failed to repay their payday loans.

If a payday lender takes you to court, it's based on the assumption that you won't respond to the subpoena, forcing the court to rule in your favor. That means that only 20% of borrowers actually have the money to repay their loan as scheduled for their next payday. Filing for bankruptcy will stop all collection efforts by debt collectors and will void the unsecured payday loan. Make sure you understand how the loan will be repaid and how much it will ultimately cost before accepting any terms of the loan.

In fact, the Consumer Financial Protection Office (CFPB) released a report showing that, over a 14-day period, 80% of borrowers end up having to renew their payday loan or apply for another loan to cover the original payday loan. Most payday loan companies in Texas have their customers fill in a later date check or authorize an electronic debit from a checking account for a future date.

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