The answer, fortunately, is no. There is no longer such thing in the U.S. (nor in most civilized countries) as debtors’ prison.
So why even mention the possibility? Because debt collectors are getting more aggressive than ever and willing to cross lines without a second thought.
So if a debt collector threatens you with the possibility of arrest or jail time, don’t believe the hype. (And it wouldn’t hurt to write down or record any such threat.)
The only way you could possibly go to jail–and I hesitate to even raise this as I don’t wish to unduly cause alarm or irrational fear of the bankruptcy process–is if you commit fraud in the context of bankruptcy. But even if there were an allegation of fraud by a creditor, it’s a difficult allegation to prove, the process takes a while, would be defended with the help of an attorney and, even in a worst case outcome, wouldn’t necessarily mean jail time.
The key distinction is that debts and failure to pay them is a “civil” action which, if necessary, is dealt with in civil court. Even most fraud connected with loans is considered civil fraud, and does not have criminal penalties (although fraud, if proven, could make the debt non-dischargeable). For jail time, there must be a “criminal” charge against you and the hearing would be in a criminal court. (And you would likely hire an attorney specializing in criminal law to defend you.)
All of which is to say, debt collection and bankruptcy are viewed as financial problems to be resolved by a set process. They don’t carry the moral stigma that people often attach to criminal acts. And as well they shouldn’t. Because at various times people in our society need debt relief and need bankruptcy help. Without that, we’d be spending a lot of government money on debtors’ prisons. And nobody wants that.
If you’re seeking help with debt collectors and have questions about the bankruptcy process in New York, please contact me for a free initial consultation.
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