Here are some basic principals to guide you. Be aware, your local jurisdiction may have different laws and you should always consult an attorney and explain your exact factual situation.
The debts most people incur these days are credit cards and I'll use that as an example. When you "sign up" for a credit card, you are in fact entering into a contract with the card issuer. The basic terms of that agreement are that the credit card issuer agrees to extend you credit with which you make purchases of goods and services and in exchange, you agree to pay the issuer the money back and with interest. Sure, thee is lots of other fine print, but that is the basic agreement. Your contract with the credit card issuer also provides that if you fail to pay the money owed that you can be found in default and the credit card issuer can sue you for breaking your promise to pay back the money you agreed to pay.
If the credit issuer wants to sue you, it commences a lawsuit based on your breach of the contract. You have the right to defend against that lawsuit just like any other if you believe that you are not in breach of your agreement or that there are other reasons you should not be held responsible. If you fail to defend against the lawsuit or if the court does not accept your defense, a judgment can be entered against you. Nothing in that judgment will send you to jail. It is just a finding that you are liable for the debt.
That part is pretty straight forward. It is what typically comes next that gets folks in difficult situations. Once a creditor has a judgment, the law gives it several means to collect that judgment. The creditors can garnish a bank account, place a lien on your house, or ask the court to conduct an inquiry of your assets. Which assets? How much? Well, that depends on where you work, where you live, and what you own. These are questions the creditor has the right to insist you answer in writing. This form is usually called a Financial Disclosure Form or Citation to Discover Assets. The court can order you to appear to answer the questions that your creditor has about your financial assets. If you ignore the writing, or if your writing is confusing, or you don't back it up with pays-tubs, bank statements, tax documents, and so forth, you might get a letter in the mail informing you of a "supplemental examination" in front of a court. When the creditor uses the power of the court to insist you appear, you must show up - if you ignore it then you are ignoring a court order. The court doesn't care much about the debt but it cares a lot about you not showing up, even if you don't have money to pay the debt. That's what can land you in jail. You can be jailed for not obeying a court order to appear - in effect, you are being held in contempt of court.
Thus, the important thing to remember is to always read and understand any papers you receive from a court regarding a debt. Even if you have no money to pay the debt, you are obligated to appear and explain that fact to the court. You cannot be jailed for owing the money, but you can be in trouble if you fail to abide by the Court's orders.
It is important that when you face any financial distress to consult with a professional who can assist you in making the right decisions. Chicago attorney Rusty Payton http://www.paytondann.com is an attorney with 24 years experience in bankruptcy, foreclosure and distressed real estate. His firm is located in the Rogers Park neighborhood of Chicago. Call on him for a free consultation today.