Can Debt Collectors Send You to Jail? 

Feeling anxious about a sudden letter from a debt collector? Wondering if it’s possible to go to jail because of debt?

You’re not alone. Every month, more than 170,000 people come to us for help with debt problems.

In this guide, we’ll help you understand:

•  Debt collectors and the law in the UK.
•  The types of debt that could lead to legal trouble.
•  How to deal with debt collectors who threaten jail time.
•  Ways to manage your debt and avoid serious issues.
•  Where to find professional advice when debt becomes too much.

Some of us have had debt collectors chasing us, too. We understand it’s a scary time. But don’t worry. We’ll show you how to handle debt collectors and explain what they can and can’t do.

Take a deep breath, and let’s start learning about how to deal with debt collectors.

Can Debt Collectors Send You to Jail?

As mentioned, it is almost impossible to wind up in jail because of debts. Around one century ago that was not the case as many people were put in jail for failing to pay what they owed. But today, this is very rare.

It should also be said that even if you were sent to jail for your debts, this wouldn’t be done by a debt collector.

What Debt Could Put Me in Jail?

So, you probably want to know what types of debt could lead to jail time. Most people who go to jail for unpaid debt and refuse to pay have:

• Criminal fine debt
• Council tax debts
• Business expense debts
• HMRC debt (unpaid tax)
• Unpaid child maintenance debt

Can I Really Go to Jail for Unpaid Council Tax?

Although council tax debt is among the list of debts that could put you in jail, it is still unlikely. Like all of the types of debt listed above, you can only be put into jail as a very last resort. You will need to have ignored the creditors or government departments and/or refused to pay before jail would be contemplated.

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Can I Go to Jail for Unpaid Loans and Credit Cards?

No, you cannot go to jail for an unpaid personal loan or unpaid credit cards. Only the debts mentioned earlier have a small chance of landing you in jail. But just because it is impossible or unlikely that you would go to jail for your debt, does not mean you shouldn’t pay.

If you ignore debts and fail to pay, they can increase because of interest and then stop you from getting a mortgage to own a home, or prevent many other luxuries in life. For further information on how to get out of debt, don’t forget to look at the debt solutions discussed on Money Nerd.

One More Way that You Could Go to Prison

There is one more way that your debt can put you in prison. This occurs not because of the debt itself but your failings to obey a court order.

When a creditor wants their money from you and you are refusing to pay (or can’t pay), they can apply to the courts for a CCJ which forces you to pay. If you then ignore the letters from the court to pay, a bailiff may be sent around to enforce the payment or repossess items. In some cases, the bailiff could take come and get you and take you to court.

Important: This can only be done by a bailiff or law enforcement officer. Not by a debt collection agency. They are not the same thing.

When at court, the judge may give you an additional penalty for failing to comply with the CCJ instruction. The judge is allowed to send you to prison for 14 days in this situation, but it is still a last resort.

Although you may have a CCJ to pay the debt, this prison sentence is not given to you because you have debt, but rather, because you have not done what the court has asked you. Therefore, it could be argued that this short prison term is not because of debt, although they are linked.

Debt Collection Agency Prison Threats

Because of the very small chance that you can end up in prison because of unpaid debt, some UK debt collection agencies have tried to illegally use it to their advantage. When they send debt letters asking you to pay, some rogue collection companies may try to use it to threaten you. It is known that some debt collection agencies will write to you to say that if you don’t pay you will be sent to jail.

They do this even if there is no chance of you going to jail – and that is illegal.

What Happens If I Don’t Pay My Debts?

We’ve all wondered – what exactly will happen if you stop paying off your debts? Well, the answer is a whole lot of bother. But not necessarily jail time!

1. Your creditor will send you reminders and then demands to get you to pay any missed payments
2. If you don’t pay, your account will default
3. If you still don’t pay your debts, your creditor can choose to sell your debt to a debt collection agency or employ an agency to chase you for the missed payments. This is where debt collectors will come in.
4. If you don’t pay the collectors, your creditor or the collection agency might be able to take legal action against you to get their money back. Legal action usually starts with a CCJ.
   If you don’t stick to the CCJ, bailiffs can be sent to enforce it and get you to pay.
5. Avoid the bailiffs and your creditor might be able to go to the High Court for HCEOs to enforce your debt.

Remember Debt Solutions Are at Hand!

If you are dealing with lots of unsecured debts and are worried about how you’re going to pay them off, you could consider a debt solution.

There are several different debt solutions available in the UK, so I recommend speaking to a debt charity as soon as possible. Their advisors will be able to look at your finances in detail and help you work out which debt solution will work best for you.

I have linked a few charities that offer these advisory services for free below.

Debt Management Plan (DMP)

A DMP is an informal debt solution that lets you pay off your debts via a single monthly payment.

Because it is informal, it is not legally binding so you are not tied into a DMP for a minimum number of payments.

Individual Voluntary Arrangement (IVA)

An IVA is a formal agreement between you and your creditors. You agree to pay a monthly sum that is distributed amongst your debts, and your creditors agree not to contact you during your IVA.

IVAs typically last for 5 or 6 years, and any outstanding debt is wiped off when it ends.

Keep in mind that IVAs are not suitable for everyone. You need to owe several thousand pounds to more than one creditor to be eligible. You also need to demonstrate that you have some disposable income every month.

Trust Deed

IVAs are not available in Scotland. Instead, you will need to opt for a Trust Deed.

Trust Deeds work in the same way as an IVA – you pay an agreed sum each month that is shared amongst your creditors, they can’t contact you, and any leftover debt at the end of your Trust Deed term is written off.

Debt Relief Order (DRO)

A DRO is a good option for those facing financial hardship with no assets and little income.

For 12 months, you make no payments, but your creditors freeze your interest and don’t contact you.

If your finances haven’t improved during this year, you may be able to write off your unsecured debts.

Bankruptcy

If you have debts but no realistic possibility of ever paying them off, you may need to declare bankruptcy.

Bankruptcy has an unfair stigma attached to it as it may be your only way of getting a financial fresh start. That said, it is a serious financial situation that should not be taken lightly.

Sequestration

Sequestration is the Scottish version of bankruptcy.

If you have little income and no valuable assets, you may be able to apply for a minimal asset process bankruptcy (MAP). A MAP is a quicker, cheaper, and more straightforward version of sequestration, so worth considering.

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What to Do If a Debt Collection Agency Threatens Jail Time?

If a debt collection agency threatens you with jail time and the threat is unfounded, you should make an official complaint about them. First, you need to complain directly to the debt collection agency and state what they did was illegal. If they don’t respond to your complaint or fail to respond in the way you would hope, you can then take your complaint to the Financial Ombudsman.

The Ombudsman will then look at the evidence and make a decision on if the agency acted inappropriately or illegally. They have the power to penalise the debt collection agency and even award your compensation.

Other Debt Collectors to look for on your Credit Report

There are hundreds of debt collectors in the UK and they each collect for different companies.

It’s surprisingly easy to not notice that you’re in a debt collector’s crosshairs.

I’d suggest you spend time checking your credit report. If a debt collector purchases any of your debt, it will appear on your credit report.

Some of the biggest to look out for include Cabot, PRA Group, and Lowell.

So if you see anything relating to their names, then you’ll need to investigate further.