Can I go to jail for failing to repay a payday loan?

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Scott Law PLLC

Houston, TX

This question is often asked by consumers who take out payday loans that they are unable to repay. Having a debt collector threaten to contact the district attorney to pursue criminal charges is a very traumatic experience for many debtors. But can a person be arrested and jailed for failing to repay a payday loan? The answer is "maybe, but unlikely." Let me explain. The simple inability to repay a debt may constitute breach of contract and may ruin your credit history, but it hardly constitutes a crime. However, that the circumstances under which a payday loan customer acquired a loan may well constitute a crime!

Texas Penal Code Sec. 31.03. THEFT.

  1. A person commits an offense if he unlawfully appropriates property with intent to deprive the owner of property.

  2. (b) Appropriation of property is unlawful if:

    (1) it is without the owner's effective consent;

The statute also explains what is meant by "effective consent." You may read Chapter 31 of the Texas Penal Code if you are curious, but basically, if you lie or make other misrepresentation (e.g., creating fake paystubs or stating you will repay the loan when you had no such intention) to get someone to consent to giving you property (be it a computer, car, or money) that you intend to keep for yourself and not pay for, your actions may support a conviction for theft. Maybe a pattern of taking out and not paying off payday loans could suggest a lack of intention to repay the loans.

Another potentially applicable statute is Texas Penal Code Sec. 32.32. FALSE STATEMENT TO OBTAIN PROPERTY OR CREDIT OR IN THE PROVISION OF CERTAIN SERVICES. Basically, it may be a crime to lie on applications to acquire credit from lenders.

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