George Simons | October 19, 2022
Summary: There are instances where you can get arrested for not paying off your payday loan. While it's illegal to be sent to jail for owing a debt, the creditor could obtain a warrant of arrest against you if you fail to appear in court when you're sued for the debt. You can use SoloSuit to respond to a payday loan debt lawsuit and win in court.
Did you know about 12 million Americans use payday loans annually? This fact comes as no surprise, given that payday loans help fulfill the financial needs of many working Americans who can't access traditional loans.
Payday loans may seem convenient and offer a short-term solution when you need immediate cash to cover an emergency. However, these loans attract high-interest rates and fees. This drawback is the most common reason people default on payday loans.
Let's dive right in and respond to these concerns.
If you've defaulted on your payday loan, you might be concerned about the consequences. Some people might even be worried about the possibility of going to jail for not paying their payday loans, but is this even legal?
The short answer is no. You cannot be arrested for not paying a payday loan. However, you can be arrested for not showing up in court when you're sued for a payday loan debt. Let us explain.
According to CNBC, there have been reports of individuals getting arrested for falling behind on their payday loans. This type of arrest normally occurs if the debtor fails to appear in court for their case hearing and not specifically for owing the debt. After you miss your court date, the payday loan representative can request the court for a warrant of arrest for contempt of court, and you may find yourself in jail until you pay bail or make a down payment on your loan.
ProPublica shares several stories of consumers who spent hours or days in jail for owing a debt with a payday loan company called Loan for Less and failing to appear in court. However, the consumers were technically jailed for contempt of court charges for not appearing at court hearings after ignoring a payday loan court Summons.
In most states, it's illegal for a creditor to even threaten a borrower with arrest.
Many individuals who've defaulted on their payday loans are particularly terrified of a payday loan lawsuit. Understandably, the courtroom is the last place they want to be for defaulting on a loan.
Payday lenders are good at making all sorts of threats, but can they sue you? Well, the answer to this is yes. A payday lender can take you to court for defaulting on a loan and if you violate the terms of your loan agreement.
However, they can only take you to a civil court and not a criminal court. So most of the time, a payday lender would threaten to sue, but they actually will not go through with it. Here's why.
First of all, going to court is expensive, considering the legal fees involved. Secondly, most lenders would prefer to negotiate with you and come up with an out-of-court agreement rather than take you to court. If a payday lender takes you to court, they're banking on the assumption that you won't respond to the court Summons, forcing the court to rule in their favor. In such a case, the judge may order a wage garnishment.
To prevent a default judgment from happening, you can use SoloSuit to file an attorney-approved Answer.
When you default on a payday loan, debt collectors begin calling you day and night. Some even threaten to have you arrested. This can be quite stressful, especially if you want to pay the debt but can't due to financial hardship.
But there's no reason to worry; the Fair Debt Collection Practices Act (FDCPA) protects you by prohibiting debt collectors from:
If a debt collector constantly harasses you and threatens to have you arrested, you can take the following actions:
The purpose of the organizations listed above is to protect you from bad business practices. When you report to these agencies, they will follow up on your complaint with the named payday loan company.
Let's look at a real-life scenario;
Example: Bill had a credit card debt of $920 with Horizon Gold. After defaulting for one year, he began receiving multiple calls a day. Bill requested the agent to stop calling and communicate in writing but the agent responded rudely and threatened him with arrest. Next, he sent a Debt Validation Letter requesting them to provide more information about the debt. HG did not respond to the request. Bill reported the matter to CFPB in detail and wrote a review in their BBB profile. CFPB tasked Horizon Gold to respond to Bill's complaints, or action will be taken against them. HG reached out to him with an apology for not responding to the Debt Validation Letter. They made him an offer to settle the debt at 50% once they sent the validation notice. Bill countered the offer, and HG agreed to Bill's offer; he pays 30% of the debt and reports the matter as resolved to CFPB and on their BBB profile.
When a debt collector initially contacts you, try responding with a Debt Validation Letter. Within five days of attempting to collect on a debt, the FDCPA requires a collector to provide validation of that debt. It requires the collector to include five points in its communication with you:
So, the debt collector must provide these five points within five days of contacting you about the debt. Then, you have 30 days to send them a Debt Validation Letter if you dispute any aspect of the debt. If the collector doesn't provide these five points within five days, then they've violated the FDCPA, and you can sue them for $1,000 or more.
Learn more about the Debt Validation Letter in the following video:
Suppose you're unable to pay your payday loan due to financial constraints. In that case, consider the following options:
If you're unable to pay the whole loan amount but can raise part of it, you can try to negotiate a payment plan with the lender. Alternatively, you can offer to pay a certain loan amount in exchange for forgiving the remaining amount.
If you reach an agreement with the payday lender, ensure it's in writing for future reference. Note that the payday lender isn't obliged to agree with you, and the negotiations might fail. If so, you still have other options.
Statute of limitations is a law limiting when you can be sued for a certain event, crime or debt. If the statute of limitation on your debt has expired, that means the debt becomes uncollectible, and the lender can't legally sue you for the debt. The statute of limitations differ according to state and the type of debt in question. For example, medical debt has a shorter expiry date than a mortgage or car loan.
It's advisable to contact an experienced bankruptcy lawyer and file for bankruptcy. Filing for bankruptcy will halt all collection efforts by debt collectors and render the unsecured payday loan void. You can file for a chapter 7 or 13 bankruptcy. Learn more about the appropriate time to file for bankruptcy in this article.
As with all forms of credit, you need to know what you're getting yourself into when taking out a payday loan. Ensure you understand how the loan will be paid and how much it will ultimately cost before agreeing to any terms of the loan.
Most importantly, if served with a Summons to appear in court for an unpaid debt, you should never ignore it. Instead, respond as soon as you can, and if you're not sure where to start, SoloSuit can help you create an attorney-approved Answer within minutes!
Check out this video to learn more about how to respond to a payday loan debt lawsuit:
SoloSuit makes it easy to fight debt collectors.
You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.
SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.
"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James
You can ask your questions on the SoloSuit forum and the community will help you out. Whether you need help now or are just looking for support, we're here for you.
Here's a list of guides for other states.
Being sued by a different debt collector? Were making guides on how to beat each one.
Is your credit card company suing you? Learn how you can beat each one.
Need more info on statutes of limitations? Read our 50-state guide.
Need help managing your finances? Check out these resources.