Welcome to Debtors' Prison, 2011 Edition: Are debtors prisons coming back?

[Better Believe It]

Welcome to Debtors' Prison, 2011 Edition
By JESSICA SILVER-GREENBERG
March 17, 2011

Some lawmakers, judges and regulators are trying to rein in the U.S. debt-collection industry's use of arrest warrants to recoup money owed by borrowers who are behind on credit-card payments, auto loans and other bills.

More than a third of all U.S. states allow borrowers who can't or won't pay to be jailed. Judges have signed off on more than 5,000 such warrants since the start of 2010 in nine counties with a total population of 13.6 million people, according to a tally by The Wall Street Journal of filings in those counties. Nationwide figures aren't known because many courts don't keep track of warrants by alleged offense. In interviews, 20 judges across the nation said the number of borrowers threatened with arrest in their courtrooms has surged since the financial crisis began.

"I wish I could do it more," said Piatt County Circuit Judge Chris Freese, who has heard hundreds of debt-collection cases. "It's often the only remedy to get people into court and paying their debts."

In one of those cases, Emmie Nichols, 26 years old, was arrested in June at her mother's house after lawyers for Capital One Financial Corp. won an arrest warrant against her for skipping a court hearing about $1,159.87 she owed on a credit card from the company. The $500 bond that freed Ms. Nichols from the county jail was turned over to Capital One as a partial payment of the debt, court filings show. A Capital One spokeswoman declined to comment on Ms. Nichols. Some judges are worried that the jump in debt-related arrest warrants is creating a modern-day version of debtors' prison. The practice ended in 1833 after decades of controversy, since borrowers owing as little as 60 cents could be held indefinitely in squalid jails until they paid off their debt.

Read the full article at:

http://online.wsj.com/article/SB10001424052748704396504576204553811636610.html


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Are debtors prisons coming back?
This post comes from Lynn Mucken at MSN Money.
March 22, 2011

The United States does not have debtors prisons, per se -- they effectively were outlawed in 1833 -- but you can still go to jail for failure to pay your debts.

Most of these legal actions are filed by payday lenders or collection companies that are sold the debt for pennies on the dollar by the stiffed businesses, which seldom find bill collection to be cost-effective. Bigger companies build credit losses into the price of their product and have accounts-receivable insurance and tax write-offs to ease their pain.

"We have created a de facto debtors prison system in the United States that is largely unconstitutional," Judith Fox, a law professor at Notre Dame Law School, told the Star Tribune. "In some parts of the country, people are so fearful of arrest they are scrambling to pay money they might not even owe."

Alan White, a law professor at Valparaiso University in Indiana, told the newspaper that even the threat of jail for debts is unconstitutional. He also questioned the practice of bail being set at the amount of the debt. "If, in effect, people are being incarcerated until they pay bail, and bail is being used to pay their debts, then they're being incarcerated to pay their debts," he said.

Read the full article at:

http://money.msn.com/credit-rating/article.aspx?post=bf5c3932-1d21-436f-b20f-093e0da61b6c

[Rage for Order]

1. Ties in nicely with this DU thread:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x720774


Unreal, isn't it?

[Better Believe It]

3. Thanks for the link.

[roguevalley]

9. usury is a mortal sin. may they all burn.

[Uncle Joe]

29. And this one.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x2729853

[lonestarnot]

2. There is a reason for all those private prisons.

[Skink]

4. Financial inovation.

[JohnnyRingo]

5. In a way they were reintroduced with the Bankruptcy Reform Act of 2005

It changed the laws to prevent bankrupt individuals from getting a "free ride" on credit card balances.

It allows a judge to examain a filer's finances and demand a specific payment to lenders. Failure to comply with the court order can result in contempt of court and jail time.

Jail is jail, whether one calls it punishment or debtor's prison.

[leftstreet]

6. K&R

[ck4829]

7. K&R

[Overseas]

8. GOP cruelty knows no bounds.

One more step in their attempt to increase the misery index and discourage Democratic voters in 2012.

[Patchuli]

12. GOP is not too popular right now

and they too can be stopped. There will be no "debtor's prison." First off, how does one pay off a debt by not working and sitting in jail? That shows the usual head-up-the-butt logic of rethuglicans.

Secondly, they will not succeed as we will all finally get sick enough of them to fire back. This I know.

[rasputin1952]

14. The same argument you make...

"...how does one pay off a debt by not working and sitting in jail?", was made to no avail in Great Britain where the use of Debtor's Prisons was the rule of the day. The answer the courts gave was essentially, "so what". Families, already destitute, would,on occasion, get an individual out of said prison, but most were left to languish with little chance of being set free, even to work to to pay the debt down.

We had the same basic system here, until some enlightened individuals figured it out...back in 1833. FWIW...there exists a kind of "Debtor's Prison" now, if one's credit isn't up to snuff w/the 3 Credit Reporting Agencies, a borrower is pretty well stuck...and these companies are not very quick about clearing records and debts paid, they sure are quick to add negative information though, even though there may be no basis for the action.

[russspeakeasy]

22. The only difference is the lack of bars and you have to pay for your

own food and shelter. Poor credit can keep you from getting a
job, gov. help, or renting a place for your family to live.

[rasputin1952]

27. Exactly...

and there is never a reason given on why one fell in arrears. Could be a medical problem, layoff...whatever; there is never a mention of paying bills on time for 20 years, it's all negative info. No matter ow one looks at it, if there was any kind of problem in the past, for whatever reason, you are a prisoner in the machinations of a business that thrives on the negative.

[Overseas]

30. One pays by increasing the profits of the GOP's friends who own the privatized prisons.

Privatization of healthcare has been really cruel and privatization of prisons has been a miserable failure too -- except for the GOP buddies of their disgusting governors like Jan Brewer who are ready to write more and more laws to fill those prisons and help their dedicated supporters.

[TBF]

10. K&R nt

[Urban Prairie]

11. Maybe every Congress-critter, high ranking military officers,

ex-POTUSes and their former administrations, that are still alive, should be jailed for sinking the "USS Titanic" into a literal trillion dollar ocean of red ink?

[jwirr]

21. That may be the single most important reason we do not have the

old English system back. Many rich are not all that rich if they had to pay their debts immediately. One misstep and in they go right along with the rest of us.

[rasputin1952]

13. As we move into a Dickensian style era...

there is no one to blame but the GOP for their terroristic approach to debt collection. Since many of the GOP policies have set the stage for so many being unemployed, it seems only fitting that these leeches on society would set the stage for even more abuse of those who were dragged into a cycle of never ending debt. Judges, who are all sworn to uphold the Constitution and the laws of their respective states are more than willing to ensure that people are dragged in off the street for an inability to pay regardless of the circumstances.

Bottom feeding bastards.

[jpljr77]

15. Devil's advocate: They aren't being jailed for owing a debt...

they're being jailed for defying a court order.

Highly selective cut and paste job in the OP. If you read the entire linked article, you'll see that judges are issuing arrest warrants for people who have defied court orders, mostly: 1) not showing up for court after repeated notices, and 2) refusing to pay on a judgement issued against them for the debt.

On #1, people get sued over their debts, typically by a collection agency or collection attorney since an original creditor would have long ago written off the debt. If the defendant doesn't show, another hearing is scheduled. If the defendant doesn't show again, a judge might issue an arrest warrant for contempt. So they're not being jailed for debt, they're being jailed for failing to show to a hearing under subpoena.

As for #2, if an alleged debtor does show for a debt collection case and loses, they have a judgement placed on them for a certain amount. Typically, this will lead to wage garnishment, house liens, a structured payment plan, etc. But sometimes, there is no wage to garnish and no assets to seize, so the person simply doesn't pay the judgement. At that point, a judge might issue an arrest warrant for -- again -- contempt.

If you think that it's unfair that creditors and collectors use the courts, please try to remember that they are enforcing a contract, willingly signed by the borrower. People tend to forget that...a lot. Having a credit card is not a right, you voluntarily surrender certain rights when you sign that credit application. Is that fair? Should the consumer/borrower have more rights? Yeah, probably. But that's the way it is right now.

Now, the use of bail payments to offset a creditor's/debt collector's bill is indefensible. That's crossing a line, imo, between government and the private sector. It's not the courts' job to recover that money for the banks, all they can do is enforce contracts.

[Better Believe It]

16. I'd call it nit picking rather than being a "devil's advocate"

And this is perfectly OK with you?

"Alan White, a law professor at Valparaiso University in Indiana, told the newspaper that even the threat of jail for debts is unconstitutional. He also questioned the practice of bail being set at the amount of the debt. "If, in effect, people are being incarcerated until they pay bail, and bail is being used to pay their debts, then they're being incarcerated to pay their debts," he said."

For all practical purposes people are going to jail for not being able to pay their private debts.

That's the bottom line.

[jpljr77]

17. No, it's not perfectly OK with me

And I said as much in the last paragraph of my post.

The "bottom line," actually, is that people sign a legal document when they get a loan. One that gives protection to both parties. It's true that in almost all cases -- especially concerning credit cards -- the bank/collector wins. But you only need to look at what's happening the mortgage industry to realize that there is consumer protection baked into credit contracts and if the lender slips up, they will lose a court case. Also, talk to a consumer attorney some time about how relatively easy it is to win a credit card collection case if you put in a little effort and SHOW UP to the hearing.

People disregard summons, collection letters and calls, subpoenas, etc. because they want to avoid the debt. What they don't realize is if they show up and say the right things and provide the proper documentation, the case goes their way a lot of times. And even if they do lose, the creditor/collector will often agree to very manageable payment plans to pay off the judgement.

Show up....just like the judge said in the quote you posted in the OP. Just show up.

[Better Believe It]

23. Pay or go to jail and show up in court with an attorney. If you can't afford one, that's tough.

[evilkumquat]

20. I have to agree with Jpljr77

Years ago, I managed a collection agency and we aggressively filed suit against debtors who didn't work out payment arrangements with us.

Without rehashing the original post, what Jpljr77 says is correct (at least in my experience) including the original court schedule:

1) Suit is filed
2) Hearing is held- if debtor fails to show, then
3) Judgment is rendered against the debtor

Typically, if the debtor ignored the first hearing (and they do in 90% of the cases), they also never willingly pay the judgment. This leads to:

1) Another hearing to determine debtor's attachable wages or assets (if the collector didn't already have it).
2) If the debtor ignored that order, a final hearing is scheduled for the debtor to explain why he shouldn't be held in contempt of court for failure to appear at the earlier hearing. Typically, the debtor shows up for this one because it says in the paperwork he risks arrest for not showing up.
3) If the the debtor ignored THAT order, THEN a "Body Attachment" is ordered against him for failure to follow the judge's order.

The upshot is, as long as the debtor shows up when ordered, he cannot be jailed.

[blackspade]

18. disgusting.

"I wish I could do it more," said Piatt County Circuit Judge Chris Freese, who has heard hundreds of debt-collection cases. "It's often the only remedy to get people into court and paying their debts."

This is a person that has no business on the bench.

[Lance_Boyle]

19. Total bullshit - people are going to jail for skipping court appearances

not for owing money. A summons to appear in court has never been an optional thing. It's one thing to appear as ordered and tell the court you are unable to pay the debt. It is quite another to disregard a summons entirely. That's a real deadbeat move, and IMO it is a *good* thing that people can be arrested and made to appear when they fail to do so of their own volition.

[ck4829]

24. Then it should be the court calling for people to come to court, not Capital One

And the bail money should go to the government, also not to Capital One.

[Better Believe It]

25. They can't afford an attorney and the court won't provide a public defender.

And the great majority of working class victims are not as well educated and informed on their rights as most DU'ers.

[ThatsMyBarack]

26. EXACTLY why I can't see doctors anymore.

Blue Cross won't cover it, I won't be able to afford the charges, and the bill collectors will send me up the river.

The beginning of the end of my life as I know it.

[indimuse]

28. Is it me..Or is this country going BACKWARDS??? n/t

[moonbatmax]

31. What, you just noticed?