In the event you are unable to pay back your payday loan, you may go to court. This option could probably be the lender’s last resort after they have exhausted all other feasible avenues and have been unsuccessful.
If you cannot repay your debt, the lender will typically contact you via follow-up emails, phone calls, and letters.
If you continue to refuse to pay a single dollar or ignore their communications, they may eventually summon you to court so they can meet you in person and try to collect their debts.
Can you be sued or taken to court by a payday lender?
Unfortunately, if you don’t make your payments on time or otherwise break the terms of your loan, any creditor, including payday lenders, has the authority to sue you and bring a lawsuit against you.
When you sign an agreement for a payday loan, you are making a legally binding agreement that you can’t break without getting in trouble.
Even when lenders have threatened to do so, they usually don’t want to. Even in a local court, court proceedings are time-consuming and costly.
Typically, neither side would benefit from engaging in a legal conflict. Payday loan firms would rather negotiate with you than go to court because they have a better chance of getting paid.
So, you can avoid legal problems if you are proactive and call the payday lender as soon as you know you won’t be able to pay them back.
You can be taken to court by your lender or debt collectors to recover the money you owe them.
What will happen if I can’t repay my payday loan?
Your payday loan default could result in a variety of consequences. This involves facing legal action, receiving calls from debt collectors, and even garnishing your wages.
The lender will take steps after the predetermined loan term has expired to recover any unpaid money.
They will charge you late repayment fees and impose higher interest rates as a start. They will try to get in touch with you to arrange an alternative repayment schedule. If you do not collaborate, they will most likely take you to court.
If you do not show up, you risk further legal troubles. The judge will decide on how to proceed – it’s often by allowing the lender to garnish your wages.
They might start regular deductions from your checking account, which could cost you bank fees. If this doesn’t work, they will begin with wage garnishment.
In this case, a percentage of your wages would be withheld and delivered straight to your lender. Your loan will charge interest for however long it hasn’t been fully repaid.
What do I need to do if a payday lender sues me?
The people that sue customers who don’t repay their payday loans are mostly debt collectors rather than payday lenders. You must take it extremely seriously if you get a court summons from a debt collector or a payday lender.
Make sure you read the warrant entirely if you receive one from the court for an unpaid payday loan. Verify that all of the information on the court summons is true. On an overdue payday loan summons, you may find the following information:
- The sum of money owed.
- How much has the borrower already paid?
- The date of the last payment by the borrower (if they made any).
- The place and time that the borrower is required to appear in court.
If you notice any errors on the court summons, you might want to contact a legal firm and ask for help. A lawyer can help you navigate the legal system and also give you legal advice.
It’s also crucial to follow any court orders that you might obtain. If you skip your court date, there could be a default judgment in the payday lender’s favor.
As a result of that decision, you might have to pay whatever costs the judge ruled in favor of the payday lender. This could include court fees, attorney fees, and other charges.
Defaulting on a payday loan is not a crime – you cannot go to jail for it.
Can a payday loan company garnish your wages?
Your salary will be garnished to assist pay off what you owe if the court decides against you at your hearing due to your failure to appear as required (or based on the judge’s ruling in your presence) by a court order.
There are strict limits on how much your employer can deduct from your income under a wage garnishment order in order to pay off your debt. Lenders can only garnish a portion of your disposable earnings, which are your earnings after taxes and eligible deductions.
Can I go to jail for failing to repay a payday loan?
Thankfully, failing to repay a payday loan does not result in jail time. In fact, it is unlawful for payday loan companies to alert you that you could go to jail if you default on your loan.
The Fair Debt Collection Practices Act, generally known as the FDCPA, prohibits payday lenders from threatening debtors with jail time or other severe criminal penalties. Defaulting on a loan payment is not a crime. Therefore, don’t take the collectors’ warnings about going to jail seriously.