Lindsay who risks being charged with stealing a $2,500.00 necklace in a California jewelry store last January 22 insists she did not steal the necklace as seen in a surveillance video of the store.
The actress was seen wearing what appears to be the necklace a week after the reported loss.
Sources connected with Lindsay tell TMZ ... LiLo thinks, "People just don't believe me and know I'm in a vulnerable position." She thinks the jewelry store owner is seizing the moment by concocting a story that Lindsay stole the jewelry. Lindsay insists it was loaned to her, TMZ.com
And we're told ... Lindsay is "extremely nervous" about the prospect of going back to jail. Although she refers to the possible penalty as jail, it's actually a lot worse ... State prison, the report added.
Lindsay's lawyer says the actress is innocent and is ready to face them in court.
TMZ obtained a statement
from Shawn Chapman Holley that reads, "We vehemently deny these allegations and, if charges are filed, we will fight them in court, not in the press."
Lohan, who has been in and out of jail for various offenses, has recently entered the Betty Ford center
, a drug and alcohol treatment center.
She was earlier ordered by the court to remain in rehab until January 3, 2011. Another court hearing is scheduled for February 25.