Thursday, June 14, 2012

Debtors' Prison, 2.0

Writer’s Note: Thank you in advance for those of you who have opted to begin reading Beyond Dollars & Sense! This is the very first posting for my blog, which I will use to inform the public about relevant financial issues regarding personal savings, personal debt, and money saving tips in these trying economic times. It is my hope to post a new issue weekly, starting this week, so that others will benefit from the same advice I was fortunate enough to have received (and apply) to my own life.

For my very first posting on Beyond Dollar & Sense!, I thought that I would write about an issue that came to my attention late last year…one that I have a personal familiarity with.
Back in the early 1990s, I witnessed my mother stressing out as a local sheriff’s deputy back in Michigan arrived at her front door, threatening to take her to jail for failure to respond to a civil judgment levied against her. I also remembering her running around scrounging for every dollar she could get her hands on trying to avoid going to jail (for the first and only time) at the tender age of 50. I remembered thinking “Is this legal? There is no more debtors’ prison!”
Fast forward some 20 years later, to a new century, a new millennium…and the same reality of debt collection. Last year, The Wall Street Journal published an article last year entitled, “Welcome To Debtors’ Prison, 2011 Edition.” In the piece, the writer chronicled how, in some states, individuals who find themselves owing money on credit cards, automobile loans, or—in my mother’s case from the 90s—medical bills face the very real prospect of being jailed for debt payments. No, this isn’t the hyperbole of some anti-capitalist leftist…it’s a practice of reality.
Despite the fact that debtor’s prison in America—as a codified law—was outlawed by both the states and the federal government in the 1830’s, modern-day creditors in the form of “aggressive and centralized” collection agencies are taking advantage of existing laws by buying up unpaid debt, and leveraging the power of local courts to collect. And although a full third of U.S. states allow for the jailing of debtors who can’t (or won’t) pay their outstanding bills, six states in particular—Arizona, Arkansas, Illinois, Indiana, Minnesota, and Washington—are stand out as hotbeds of this practice. Before you start saying, “Good…people should pay their debts,” individuals in some of these cases are being jailed without having any idea that they were being sued to collect a debt (not that in these economic times, people are necessarily fixated on being sued for an outstanding bill…not when they are struggling to pay more immediate and more bills).
This does not mean that the practice is an arbitrary procedure. Arrest warrants are generally issued if a borrower defies a court order to repay a debt, or simply doesn't show up in court while a debt is being pursued by interested parties. And among the most frequent seekers of these warrants are retailers, credit-card issuers, landlords and debt collectors, according to court filings and interviews with judges and lawyers.
Driven by a bad economy, high consumer debt, and a growing collection industry that buys and aggressively pursues bad debts, collection agencies have been increasingly employing the use of warrants in order to leverage the power of local and state courts to jail debtors…all in an effort to increase profits. Though not every warrant in every case related to attempts to collect on personal debt results in an arrest and subsequent jailing, in jurisdictions where the state gives courts explicit sanction to do so, judges can (and do) jail individuals for periods up to and including “indefinite incarceration” for failure to pay as little as $100 in debt to a given company. Whether a debtor is locked up depends largely on where the person lives because simply put, there are no universal applied legal standards for the practice. Enforcement in most cases is inconsistent from state to state, and even county to county.
For example,

in McIntosh County, Okla., south of Tulsa, issued about 1,500 debt-related arrest warrants, up from about 800 a year before the crisis, according to a court clerk. More than 950 borrowers got similar warrants in Salt Lake City courts last year. Maricopa County, Ariz., officials issued 260 debt-related warrants in 2010.

According to Spokane, Washington attorney Michael Kinkley, “(The) law enforcement system has unwittingly become a tool of the debt collectors.” Kinkley, who has represented arrested debtors, added that, “debt collectors are abusing the system and intimidating people and law enforcement is going along with it." And with no national statistics being kept on the number of debtors across the country who are arrested for this particular reason, the practice remains largely unnoticed outside of legal circles. One consumer advocate, deputy director Robert Hobbs of the National Consumer Law Center has even gone on record with his “suspicion” that “the debt collection industry does not want the world to know these arrests are happening because the practice would be widely condemned.”

There could be something to Hobbs’ suspicions. According The Wall Street Journal article from last year, J. Brandon Black, president and chief executive of Encore Capital Group, Inc., the country’s largest publicly traded debt-buying firm by revenue,

last year began requiring law firms handling its cases to follow a "code of conduct" that includes this sentence: "Under no circumstances should a firm cause a consumer to be taken into custody involuntarily."

According to the article, “the San Diego company decided to stop threatening borrowers with jail because the practice made Encore look bad.”

The recent profit spikes of the three top collection purchasing companies in the U.S., responsible for the initiating the majority of debt-related warrants

Other anecdotal evidence adds credence to Hobbs’ suspicions. Last year,

Vanderburgh County, Ind., Superior Court Judge Robert Pigman asked Indiana's highest court to review the legality of debt-related warrants after law-enforcement officials complained they can't quickly access arrest orders for dangerous criminals because their computer system is clogged with debt cases.

In other areas across the country, some judges are issuing fewer debt-related arrest warrants because law-enforcement officials concerns such cases detract resources from more relevant offenses, such as pursuing violent offenders.

So what’s it like to be pursued by both companies and law-enforcement for the relatively minor offense of owing debt? Consider the following cases from part of the Minneapolis Star Tribune series, “In Jail for Being in Debt.”

As a sheriff's deputy dumped the contents of Joy Uhlmeyer's purse into a sealed bag, she begged to know why she had just been arrested while driving home to Richfield after an Easter visit with her elderly mother.
No one had an answer. Uhlmeyer spent a sleepless night in a frigid Anoka County holding cell, her hands tucked under her armpits for warmth. Then, handcuffed in a squad car, she was taken to downtown Minneapolis for booking. Finally, after 16 hours in limbo, jail officials fingerprinted Uhlmeyer and explained her offense -- missing a court hearing over an unpaid debt. "They have no right to do this to me," said the 57-year-old patient care advocate, her voice as soft as a whisper. "Not for a stupid credit card."

Uhlmeyer’s case is an extreme one, but other individuals have had as equally trying an experience as hers.

Deborah Poplawski was feeding a parking meter in downtown Minneapolis when city police pulled up, arrested her and took her off to jail. She was forced to change into jail-issue underwear and an orange uniform and sleep in a room with a dozen women, one of whom offered her drugs. She spent 25 hours in jail. ("Unpaid debt? You could go to jail")

As alluded to previously, the single biggest reason that collection companies/debt buyers are so successful in initiating these arrest warrants is because most debtors simply fail to appear in court during civil procedures—some 94% by one New York-based nonprofit’s estimates of residents in that area. That same nonprofit, found that some “71% of people sued were either not served with the required notice or served improperly,” and “of the suits brought by debt buyers, 35% were clearly meritless.”
So how can you—if you reside in a jurisdiction where such practices are a possibility—avoid being jailed for failure to pay off your personal debt? Here are some suggestions

Remember, bill collectors can legally seek warrants to arrest people who don't respond to legal action over debts.
• Carefully read documents from collectors. You may not recognize a creditor's name or the amount owed. Old debts often are sold to debt-buyer firms, which tack on interest and fees.
• If you get a summons and complaint, it means you are being sued and the case is going to court. A summons can be delivered by hand or by mail, and needn't be filed in court first.
• Respond promptly to a summons, admitting or denying the debt and disclosing requested information. Watch for court hearings. If you ignore such legal matters, the collector can win a judgment by default and seek a warrant for your arrest.
• Debtors have some rights even if they owe money. For example, Minnesota law prevents collectors from obtaining judgments after six years.
• If you want professional advice, but can't afford a lawyer, ask the court clerk about volunteer attorneys who answer questions about collection cases.

Sources: National Consumer Law Center, Federal Trade Commission

Other useful advice to protect yourself?

• If you are either served court papers or contacted by a collector by phone or in writing, you must show up in court (in the first instance) or answer by certified mail return receipt requested (in the second instance.)
• You have 2 basic defenses: Either you know the debt is not yours, in which case you ask them to prove otherwise; or if it is yours and it's past the statute of limitations, you tell them that it's no longer legally enforceable in your state.


  1. While I think it is ridiculous, unnecessary and unconstitutional for judges to issue arrest warrants for debt collection I don't have sympathy for those it affects. Why, because I have a warrant out for my arrest due to failure to pay child support.

    Before I am attacked and people say, "that's different," let me say two things. #1, Hitler said that the state can get away with anything if it is under the pretense of the "best interests of the children." #2, A St. Louis attorney told me that support isn't about helping kids, it's about revenge and punishment.

    There is no need to imprison anyone for debt, a judgement allows for lien attachment, reposession of personal/real propety and wage garnishment. All of these will lead to the desired goal (payment of debt)whereas imprisonment does the exact opposite. It causes a burden on the debtor's family and the taxpayer (it costs on average $50,000 to incarcerate for one year). Think about it, nobody can pay a debt if they are in prison. The only people who benefit financially is the jailers/prison corporations.

  2. Morning. First, allow me to thank you for reading and being the first commenter on my newest blog. Second, I hope to be doing a piece on child support soon on shortcomings of the “child support” system on my regular sister blog, Beyond The Political Spectrum soon enough. Lastly, the reason I wrote this is because of my personal experiences from the past. In fact, I recently myself was contacted in the last2 weeks from a collection agency about a $400 bill from the year 2000—yes, a 12-year-old bill that apparently (and unknowingly to myself) still on my credit report. Are you kidding me? Can you imagine how many times such a bill was purchased and re-purchased from numerous collection agencies? THAT’S not about paying on a debt, that’s about a business attempting to turn a profit, pure and simple. Taking a loss is sometimes a part of life, for both consumer and businesses.

    1. First, I will be looking forward to your blog about the shortcomings of the child support system, I hope you email me when you publish it. Second, I was a bill collector for 10 yrs and I have studied the law in regard to collections and breach of contract (I noticed that you have studied the law also).

      I do not know about other states you mentioned and maybe things have changed regarding the civil process. In MO a person need not respond or appear in court to a civil process as long as they realize a default judgement will be levied against them if they don't respond or appear. A defalult judgement on behalf of the creditor does not allow him to pursue criminal avenues but only allows the creditor to pursue the legal collection methods that pertain to lien attachments, sheriff sales, wage attachment and reposession of collateral.

      Only in rare occassions does a judge issue a written order to demand that a defendant sign over a deed, return a piece of collateral etc. but if he does do so the defendant will receive a copy of that order to be complied with.

      If a person/defendant fails to comply with that specific order then he will be violating a court order and subject to arrest (judges don't issue orders that you have to pay a debt, they issue orders that say you have breached the contract and will ask that certain things be done as mentioned above).

      Thus, a defendant isn't being arrested for not paying a debt but because they failed to comply with a specific order about the collateral of the debt.

      But, regarding child support the states and the courts have legislated from the bench and have violated the due process and constitutional rights of men saddled with child support (because it is a multi-billion dollar business that the average person is not aware of). That is not just my opinion but the opinion of many involved in jurisprudence.

      I hope your blog piece deals with the corruption not just the unfairness and the obvious. It's the unobvious (the dirty dealing under the table antics)that people need to be made aware of.

      If a man can be imprisoned for non payment of child support (a debt), why shouldn't the idea that a man/woman be imprisoned for a car or credit card debt be far behind?

  3. And if you don't owe the debt and weren't properly served (sewer service) . SUE and have the process server jailed for falsifying documents . Sue the junk debt buyer and Demand the judge 1) Jail the debt buyer, w 2)work to have their attorney disbarred, 3) Demand your legislatures pass laws and enforce against this practice, 4) Demand that the judge be removed from the bench

    1. Unfortunately in America, convicting and removing a judge from the bench is harder than killing a cockroach; all but the most serious allegations and gross acts will result in his/her removal. However, I'm DEFINITELY for forcing our legislators to change the laws!