Be aware of the bankruptcy warning signs in your own life!

warningThere are many warning signs that can appear in person’s financial life that can signal that a person is insolvent and in need of warning 4declaring bankruptcy.  If you can recognize these signs then it is possible for you to prepare to file for bankruptcy.  A timely bankruptcy filing can avoid the pitfalls of irreversible financial mistakes.  I often discover that my clients have made these mistakes prior to coming to see me.

I wanted to warn people in this blog so they could consider bankruptcy when the financial danger first appears so they can avoid the mistakes that come with the failure to recognize the warning signs of an impending bankruptcy.  If these signs appear you may be in a situation where bankruptcy makes more sense than continuing with a charade or outright lie that you are “someday” going to pay your debts.

Many people continue with this denial for years and years and some make many financial mistakes because of it.  Some will cash in their retirement funds or sell other property to raise cash in an attempt to pay down their debts.   Retirement funds and many other types of property are exempt in bankruptcy.  It is always a mistake to cash in retirement funds or many other types of property that are exempt in a bankruptcy.   You can keep these assets in a bankruptcy and still get rid of your debts.

Some people will struggle along for long periods paying partial payments to creditors which will often cover only interest on their debts.   This only results in them their spending endless amounts of money which could have been saved had they only admitted to themselves that bankruptcy made sense.  Some will even borrow some money from friends and relatives in an attempt to pay down the debt.  This money is completely wasted and probably lost forever if these people eventually do file a bankruptcy.

1) The first warning sign is when you are paying interest only on credit card or other debts.  If you cannot pay down the debt itself but you are paying interest only then that is a sign of trouble ahead.  Interest rates will rise and just like our government you will eventually reach a point where your interest on your debts takes up a huge share of your income so that you cannot cover your basic monthly expenses for living.   This is an unsustainable situation and one which signals that bankruptcy make s a lot of sense for you.

2) Unemployment or underemployment.  If you have debts that you could afford to pay on when you high paying job but then you lose that job (or you get a job which pays far less) then you may be headed for bankruptcy.  Some will believe that they can magically still pay these debts even though they now need their now reduced income to continue to pay their monthly expenses.

3) When your expenses exceed your income each month before you pay your debts.  If you have no money left over after you pay your current monthly bills to pay past debt payments then it is probably time to consider bankruptcy.

4)  If you have had a vehicle repossessed and you have been hit with a large deficiency balance because of it then you may need a bankruptcy.  Some of my clients have multiple cars repossessed and they thus have multiple deficiency balances that can add up to tens of thousands of dollars.  If they cannot afford to keep up with payments on the vehicles prior to repossession then they will probably not have enough income to pay off the deficiency balance on the old car and somehow secure a new car to drive.

5) Another sign is if you suffered some outrageously high medical debt that is unpayable.  Many of my clients are uninsured or underinsured.  This works for some unless there is a need for an expensive medical procedure.  It is not long before the collectors are calling you to pay tens or even hundreds of thousands of dollars in medical bills.  They will demand that you repay just like any collector and you may not have the income to do it.

6) Then there is the constant steady unabated calls from creditors that you cannot pay so you do not answer your phone.  And this leads me to the all important  psychological  effects of long-term debt upon people.  The constant harassing calls and the knowledge that there is a debt out there that you have no way of paying is a tremendous psychological burden to people.  Bankruptcy lifts this burden, eliminates the debt and the terrible unending stress that goes with it.

7) Some people have multiple court judgments against them for unpaid bills.  These judgments could be for credit cards, deficiency judgments, unpaid medical bills, or debts of any kind for which a creditor has sued you and obtained a court judgment against you.  That creditor can now garnish your wages, seize your property, or demand you come into court for a debtor’s exam.  These “exams” will allow creditors to pry into your finances no matter how much you wish to keep them private.  These are to be avoided at all costs.

8) You may already have garnishments taking 25% of your income.  You now are operating with a reduced income and each creditor is standing in line to get his 25%.  You could pay this virtually forever if you owe enough money to creditors.  Bankruptcy will stop the garnishments, return your income level to what it should be, and banish the debts forever.

All of these are signs that bankruptcy probably would make sense for you and you should get some advice from a bankruptcy attorney.  If you have several of these warning signs (and even if you have only one) then bankruptcy is an option to consider.  There is a little bit of a miracle in bankruptcy.  It can wipe out your debts and free you from your debt burdens.  It is the only way I know of but we don’t need another because it works so well.  So think about if you have any of these signs and if you do then consider bankruptcy.

I am a San Diego bankruptcy attorney.  For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation or for any other advice about bankruptcy or debt at (619) 702-5015. Call now for free credit report and analysis!

For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at farquharesq@yahoo.com.

Warning sign courtesy of Free Grunge Textures.  Danger sign courtesy of Atomicjeep.

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Can I still go to debtor’s prison if I owe money? Look out Charles Dickens, in some states unfortunately it appears that it is happening now!

(My most recent debtors prison blog is found here: http://bit.ly/I2qMO2 .

There are numerous articles posted online that describe cases where people appear to have been put in jail in some states for merely owing  monetary debts.  This can happen to debtors who either owe money to the court or to private parties.  And this has happened in spite of the fact that debtor’s prisons were outlawed federally in 1833.  Most of the states followed suit after 1833 and included clauses in their constitutions prohibiting imprisonment for owing money to someone.

In spite of these prohibitions debtor’s prisons seem to be making a comeback.  There are states where it’s possible to put someone in jail for failure to pay a debt.  I am surprised that lawyers in these states have not put together constitutional challenges to someone who was thrown in jail for such a monetary debt.

According to blog I found online people are languishing in Illinois jails, in Champagne and other counties, for owing unpaid traffic tickets.  A law professor from Notre Dame Law School quoted in the article says that we do have “de-facto” debtor’s prisons because of this practice of jailing debtor’s for merely owing money in spite of constitutional prohibitions even if the money is owed to the state.   According to this law professor this creates a situation where debtors are scrambling to come up with money by any means just to stay out of jail.

An article in the Saint Petersburg Times points out that it costs the jails $53 per day (in Florida) to incarcerate these people who often don’t owe much money.  So the taxpayers pay for the jailing, the judge, and the whole judicial system that wastes time and money trying to collect from these destitute people.  In Florida they have an ominous sounding “Collections Court” that handles these cases and about a third of Florida counties have these courts.  Even in the counties without these courts people are still being jailed for owing money.

According to the Times article it costs the system $62,085 to bring in $80,450 in debt.  Those languishing in jail for these unpaid tickets are certainly poor and often minority but anyone without means can get caught up in this travesty of justice.  How is it still a possibility that you could go to jail for owing money?  Were debtors prisons not outlawed in the 1800s?  Didn’t Charles Dickens inform us 200 years ago about the foolishness of this practice?

The Times article points out that you can be jailed for violating a court order or for failing to make court ordered payments.  So technically they are not being jailed for owing money but it amounts to the same thing.  Jail time is usually given to people who owe spousal and child support but legal experts argue that it is all illegal.

Now there is more and more disturbing chatter on the internet about debtors being jailed for owing a purely private company money.  There are horror stories emerging about arrests made and persons jailed for owing money to private parties.  On such woman was arrested one day, handcuffed, put in a very cold police car, brought to jail and no one told her why for some time while the contents of her purse were unceremoniously dumped in a plastic bag.  She spent a cold night in jail keeping her hands under her armpits for warmth until 16 hours later when she was informed that she missed a court hearing concerning some private debt.

In that case she had missed a court hearing but in Indiana a man faced jail for just failing to pay a purely private debt.  His incarceration had nothing to do with violating a court order.   According to an online article in the Minnesota StarTibune a lawyer challenged the constitutionality of a debtor being threatened with jail for owing a debt.  The appellate judges agreed with the lawyer and he won the case because debtor’s prisons were made illegal in Indiana in the 1850s.

The article in the Star Tribune points out that there is an inconsistency with who is locked up when, and for how much debt, and that all of these things vary from state to state and county to county.  It also makes mention that no one knows how often this happens as no statistics are kept of these incidents.  One man in Illinois was locked up by a judge “indefinitely” for owing $300 to a lumber yard.

Now it seems that the collection agents are influencing the legal system more and more to be more creditor friendly.   Some would say that the collectors are subverting the legal system and using the threat of jail and jail time extract money from people who cannot afford to pay anything towards these privately held debts.

The good news is though that bankruptcy can remove most debts from your balance sheet.  After a bankruptcy discharge you legally no longer owe the debts anymore so no creditor can try to collect on them or try to get you put in jail if you don’t.  Your legal obligation to pay these debts is eliminated.  With debt collectors gaining in power and money and influence this is a very good thing.

In California I know that the courts can threaten jail if you do not attend the court ordered “debtor’s exam”.  This is where a creditor can ask you all sorts of personal questions about your assets and your financial situation.  The courts cannot jail you if you do not pay the creditor in California but they threaten to jail you if you don’t show up for the court ordered exam.

I filed a case for a client the day before his debtor’s exam and he brought his bankruptcy case number to the debtor’s exam.  The other attorney did not know what to do but the judge threw the whole case out right there and told her to go to bankruptcy court for any money.  My client had nothing and the creditor had no reason to declare his debts non-dischargeable so that is the last we ever saw of the creditor.  My client got his discharge without a problem.  Bankruptcy is indeed a powerful mechanism to defeat over-zealous creditors.

You almost always don’t have to argue whether you owe a debt after bankruptcy and you don’t have to argue whether any punishment is constitutional.  I wrote another blog about debtor’s prisons here: http://bit.ly/JmsMFt .

I am a bankruptcy lawyer practicing bankruptcy law in San Diego California.   For more information related to debt, bankruptcy, or debtor’s prison please visit my websites at www.farquharlaw.com and www.freshstartsandiego.com.  Or call me directly for a free consultation at (619) 702-5015.  Call now for free credit report and analysis!  For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Debtors prison end run in California and elsewhere. Beware “Contempt of Court” and the Debtors exam.

Numerous articles are appearing recently about debtors prisons and whether a debtor can be thrown in jail for owing money to private individuals.  Debtors prisons were written about by Charles Dickens they were outlawed in the 1800s in America and we all thought debtors prisons were gone for good.

It seemed like a good idea a long time ago to not put people in jail for owing money to private individuals.  It appears that they have resurfaced in some state as I blogged about here  http://bit.ly/HPAMsQ  and here http://bit.ly/JmsMFt

I also blogged about how in the California constitution people could not be jailed for owing private debts here  http://bit.ly/I9TkYh .  This California constitutional prohibition of debtors prison seems to solve the problem in this state and we can rest easy because that is just other states that jail people for debts right?  Wrong.

I received comments on my blogs that related real life situations where people had been put in jail for owing debts here in California.  I also researched the issue some more and spoke to other attorneys to see what they were facing.  It appears that in the end judges can do an end run around this prohibition on debtors prisons  They do this with the contempt of court citation and the debtors exam.

A contempt of court citation comes if a judge issues a valid order to pay a debt, and the debtor has notice o the order, and then he debtor willfully fails to comply with the order.  The the debtor can then be jailed.  This comes up most commonly in child support cases where a party is ordered to pay and does not when it has been determined that he or she has the ability to pay.  I would argue though that this is an end run around the debtors prison prohibition because child support is a debt owed to a private individual.  Your ex is not a public agency.

In a number of other states creditors like credit card companies or other creditors have gone to court and moved judges to somehow issue these orders to pay.  When the debtors failed to pay the judge jailed them for contempt.  Some didn’t even have notice as the Sheriff showed up at their door one day and carted them away to jail.  (So such for the notice requirement).  These creditors have circumvented the laws, used the court to collect their private debts, and reinstituted debtors prisons.

I have not heard of these types of creditors getting judges to give them such orders for credit card type debt yet in California but I would not put it past them to try in the future.  For now the contempt of court citations seem to be limited to child support and unpaid court fines.  I don’t expect it to stay that way forever as word gets out of what other states are doing.

But remember always that a creditor in California can get you into a debtors exams. They have similar proceedings in other states.  These debtors exams are bad things all the way around for debtors to attend.  If a debtor is summoned to attend a debtors exam by a creditor the debtor must attend and a warning appears on the summons that failure to appear will result in an arrest warrant for the debtor.  So there is the first way that debtors exams can land you in jail for a private debt by failure to appear at a debtors exam.

This is exactly what happened to a debtor in Pennsylvania according to a blog I read online.  There a debtor failed to attend a deposition session for a type of debtor’s exam at a lawyer’s office and the lawyer immediately filed motions to have the debtor arrested which he was.  This same tactic could be used here in California if a debtor misses a debtors exam.  An arrest warrant will be issued for failure to attend the debtors exam or violation of a court order or contempt.  Creditors are aggressive and they will try anything to get around the California constitution.

If a debtor attends a debtor’s exam then he or she is required to answer questions under penalty of perjury.  These questions are very intrusive and they relate to the debtors entire financial situation.  All sort of personal questions about income, assets, and bank accounts could be asked for the purpose of getting the debtor to pay the debt.  If assets and income is uncovered in these exams then it is possible that the creditors could move for some kind of court order to force payment of the debts.  Violation of that order could also land a debtor in jail.  Debtors prison again.

There is a great way to avoid debtors exam, debts, and creditors though.  That would be to file bankruptcy.  A bankruptcy filing will stay the collection procedures for all dischargeable debts and a discharge will mean that the debtor is off the hook for the debt.  I filed a bankruptcy for a client the night before his debtors exam and he went the next day and the judge through the whole case out because of the bankruptcy stay.

If bankruptcy is unavailable there is the Fair Debt Collection Practices Act (FDCPA) that establishes procedures that debt collectors must file or face sanctions.  Contact an attorney for advice on FDCPA or bankruptcy.

I am a San Diego bankruptcy attorney.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com for more info. about any of these topics.  Or call my office for a free consultation at (619) 702-5015.  Call now for free credit report and analysis!  For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Go ahead and file bankruptcy! What are you waiting for? Those debts don’t get any better with age!

Debts are not like wine.  They get much worse with age.  All sorts of fees, penalties, attorney costs, and other costs get added to them including interest.  The total amount owed can double or even triple in size.  As time goes on even more and more money is owed to these creditors.

The creditors will not go away either.  This is something that I continually warn my clients about.  They will continue to sell you debt and increase it as it goes.  Debt collection is one of the biggest industries in this country because it is so profitable.  It is also the one that is complained about the most to government agencies because of alleged abusive practices.

Collection agents are not nice people as you may have experiences first hand.  They don’t care what you problems or limitations are.  You may be on your death-bed or so disabled that you are completely unable to work.  When you tell the collectors that they will not care in the least and they will just demand that you pay them unreasonably high payments.  They will tell you to go borrow the money.  They have told disabled clients of mine just to pay immediately or they will sue them.

If one agency gives up on you then they will sell it to another and another.  They will never go away and always come after you.  They will ring you phone hundreds of times a day.  They will fill your mailbox with bills.

Eventually they will sue you in court.  You probably will not go to court or answer (most people don’t) and they will get a default judgment against you.  Now they can collect anytime they want.  They can lien homes, garnish wages, take your bank accounts or even get you into court for a debtor’s exam.  All of these things are bad, unpleasant and to be avoided.

Bankruptcy can end all this nonsense though and it is the only way I know to get out of these debts short of paying these people.  If you don’t have the money then paying is out of the question and that only leaves bankruptcy.  It may be time to admit this fact and begin to look into filing.  Bankruptcy will stop all collection efforts and stop these collectors from calling or suing or garnishing or liening or taking any other action to collect your debt.  (See here for additional reasons for why you should file for bankruptcy).

After your discharge you no longer owe the debt.  It’s a wonderful happy feeling on that day.  So think about it, call a bankruptcy attorney, and begin considering the real possibility of escaping your debts before they drown you.

Please visit my website for more blogs and really good bankruptcy information at www.farquharlaw.com or www.freshstartsandiego.com.   Or call my office for a free consultation at (619) 702-5015.  For my e-book, 13 things you should do to prepare for bankruptcy, e-mail me at farquharesq@yahoo.com.

Update on debtor’s prisons: Wall Street Journal confirms they are returning. I say let my people go!

(See my most recent debtors prison blog here: http://bit.ly/I2qMO2 .

I wrote about this in a previous blog but now the Wall Street Journal has confirmed that there is indeed a widespread use of what appear to be debtor’s prisons in many states in America even though such practices were outlawed federally and in most states  in 1833.  This practice is increasing with the deepening and lengthening of this recession.  So just when people are hardest hit by job loss, high unemployment, higher commodity prices, and housing price collapse, they are also getting hit with being put in jail for owing purely private debts.

Some judges appear to be on board with this.  One is quoted in the article saying “wish I could do it more” and “It’s often the only remedy to get people into court and paying their debts”.  No matter to the judges if the debtors can’t pay because they have no money and no job.

These debtor’s prisons were outlawed almost 200 years ago for a reason.  It makes no sense to jail a person who owes money.  It costs more to jail them than could ever be collected from them.  It breaks up whole families, subjects people to the humiliation and danger of jail, and can leave them emotionally scarred for life.  If you don’t believe that this is happening now then check out the stories below.

Also a debtor’s prison can subvert the legal system.  Hundreds of years ago they were used by people to get their enemies out of the way.  The creditors knew that the people they had jailed were not going to pay but they wanted them in jail for revenge often times.  There are other motives for jailing people for debts like putting the fear of jail into everyone so they never dare to not pay any debt.

I believe that our ancestors actually knew better than we did which is why we should give them more respect.  They gave us the Constitution and they outlawed debtors prisons in 1833 for a reason.  They realized then what we have forgotten now.  In a free country debtor’s prisons are extremely harmful to the populace and they should be banned altogether and they should not be allowed to creep back into operation.  No one should ever be jailed or fear jail for owing a purely private debt.

Debt collection companies use our taxpayer-funded court and prison systems to collect their private debts.  It doesn’t matter to them how much it costs because they are not paying for it and they are just eventually getting paid from it.  If they find a friendly judge like the one above then so much the better.

And now for the horror stories.  One man in Indiana, pictured with his kids, spent two nights in jail for a $4,000 debt.  What did they tell the kids when they asked where’s daddy?  What if he is a single dad?  Another from Carbondale Illinois spent five days in jail for failing to pay a $275 debt.  In a previous blog about debtor’s prisons I talked about a woman handcuffed and carted off to jail who kept there all night while she stayed awake and shivered from the cold.  She wasn’t told until the next morning even what the charge was.  It was of course non-payment of some private debt.  Another was threatened with jail by the judge in the case “indefinitely” until he began making payments to some lumber company.

Another man in Indiana in 2009 answered a knock on his door to find the deputy sheriff there with a warrant for his arrest.  He was arrested in front of his two kids and taken to jail.  There he spent two nights and he was stripped searched and sprayed for lice.  He described it as “the scariest thing that ever happened to him”.  It turned out that he owed around $4,000 to the loan company for his truck which was probably a deficiency balance.

The most troubling thing is that he stated in the article that he did not even know he was being sued.  He was finally let out of jail after two days after he agreed to pay $1,500 to this company for the truck.  But this person it seems was not properly served and had no idea he was being sued until he was summarily thrown in jail for merely owing money to a private party.

Often the people who are thrown in jail are destitute and can’t afford rent and food let alone these debts.  Are we to let them languish in jail “indefinitely” or forever because they cannot pay?  Are we then not returning to some dark ages?

It’s far worse too if there has been some mistake.  The debt collectors say they rarely make mistakes but that is not my experience.  They easily could have the wrong person or the wrong amount as they tack on all sorts of fees.  They can also easily fail to serve a person the lawsuit so the jailed person may have no warning of what is coming.

My clients often have their debts double or triple over the years before they discharge them in bankruptcy.  You have a right to demand debt validation according to the Fair Debt Collection Practices Act but many debtors don’t demand validation and others are arrested and jailed without warning before they know what is even happening.

Some states’ regulators are fighting back.  Illinois is seeking to revoke the license of at least one debt collector and Kentucky is seeking to do the same.  Sometimes these companies have been granted a vast number of arrest warrants against individuals for non-payment of a private debt.  The Federal Trade Commission is also investigating but in the meantime debtors are still going to debtor’s prison with the full blessing of many judges.

In fact 5000 such arrest warrants for debts have been issued since 2010 in just nine counties that reported in the one-third of states that allow this.  But what about the nonreporting counties?  Many counties don’t report so we don’t even know how many people are languishing in illegal debtor’s prisons across the country.  It seems that the illegal arrest warrant issuing has increased substantially along with the economic crisis.

Washington state has passed a bill requiring collectors that they prove (or validate) debts before an arrest warrant can issue for that debt.  Florida is issuing special training sessions to judges so they know about the abuse that can result from this.  In McIntosh County in Oklahoma 1500 arrest warrants were issued which is up from 800 the year before.  950 received arrest warrants from Salt Lake City courts and Maricopa County Arizona issued 260 in 2010.  This problem is not going away but continues to increase.

I know from my clients that people have no more money this year than last year but the arrest rate is increasing.  And these arrests are illegal according to federal laws and according to all states.  Debtor’s prisons were outlawed so how is this happening?  These arrests need to be challenged by lawyers whenever and wherever they occur in my opinion until some precedence can be established that future debtors can rely on protect them from jail.

In California I am not currently aware of people being issued arrest warrants for owing purely personal debt but be aware of situations that could amount to debtor’s prison.  Courts always maintain that they put people in jail for violating a court order and not for owing debts and thus they get around the constitutional prohibitions.  Some creditors in some states have used this loophole to just get a judge to order payment of the debt and when payment is not made then the judge issues an arrest warrant for failing to follow a judicial order.  This amounts to the exact same thing as a debtor’s prison.

In California they have not gone there yet as far as I have seen.  Collections are still a responsibility of the creditor once a judgment for the debt has been issued by the court.  We in California are thus luckier than many other states.  But creditors can demand that debtors attend a “debtor’s exam” and the creditors can have a court issue the order.  Failure to attend one of these can result in an arrest warrant being issued and can result in a debtor being put in jail.  So be careful if a debtor’s exam is ordered if you have unpaid debts in California.  It can possibly be used by creditors as a back door way of getting you in jail for purely private debts.

Remember that filing bankruptcy results in an immediate stay being created which blocks any further collection efforts being used against you.  This would include any use of debtor’s exams and presumably it would require your release from jail for any failure to pay any debt.  It would be hard to file for bankruptcy if you are in jail so it’s better if you beat them to the punch and file before things get this bad.

I am a bankruptcy lawyer practicing bankruptcy law in San Diego California.  For more bankruptcy or debt related info. (including debtors prison) please visit my website at www.farquharlaw.com and www.freshstartsandiego.com.  Or call me directly for a free consultation at (619) 702-5015.  Call now for free credit report and analysis! 

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Can I still go to debtor’s prison if I owe money? Look out Charles Dickens, in some states unfortunately it appears that it is happening now!

(My most recent debtors prison blog is found here: http://bit.ly/I2qMO2 .

There are numerous articles posted online that describe cases where people appear to have been put in jail in some states for merely owing  monetary debts.  This can happen to debtors who either owe money to the court or to private parties.  And this has happened in spite of the fact that debtor’s prisons were outlawed federally in 1833.  Most of the states followed suit after 1833 and included clauses in their constitutions prohibiting imprisonment for owing money to someone.

In spite of these prohibitions debtor’s prisons seem to be making a comeback.  There are states where it’s possible to put someone in jail for failure to pay a debt.  I am surprised that lawyers in these states have not put together constitutional challenges to someone who was thrown in jail for such a monetary debt.

According to blog I found online people are languishing in Illinois jails, in Champagne and other counties, for owing unpaid traffic tickets.  A law professor from Notre Dame Law School quoted in the article says that we do have “de-facto” debtor’s prisons because of this practice of jailing debtor’s for merely owing money in spite of constitutional prohibitions even if the money is owed to the state.   According to this law professor this creates a situation where debtors are scrambling to come up with money by any means just to stay out of jail.

An article in the Saint Petersburg Times points out that it costs the jails $53 per day (in Florida) to incarcerate these people who often don’t owe much money.  So the taxpayers pay for the jailing, the judge, and the whole judicial system that wastes time and money trying to collect from these destitute people.  In Florida they have an ominous sounding “Collections Court” that handles these cases and about a third of Florida counties have these courts.  Even in the counties without these courts people are still being jailed for owing money.

According to the Times article it costs the system $62,085 to bring in $80,450 in debt.  Those languishing in jail for these unpaid tickets are certainly poor and often minority but anyone without means can get caught up in this travesty of justice.  How is it still a possibility that you could go to jail for owing money?  Were debtors prisons not outlawed in the 1800s?  Didn’t Charles Dickens inform us 200 years ago about the foolishness of this practice?

The Times article points out that you can be jailed for violating a court order or for failing to make court ordered payments.  So technically they are not being jailed for owing money but it amounts to the same thing.  Jail time is usually given to people who owe spousal and child support but legal experts argue that it is all illegal.

Now there is more and more disturbing chatter on the internet about debtors being jailed for owing a purely private company money.  There are horror stories emerging about arrests made and persons jailed for owing money to private parties.  On such woman was arrested one day, handcuffed, put in a very cold police car, brought to jail and no one told her why for some time while the contents of her purse were unceremoniously dumped in a plastic bag.  She spent a cold night in jail keeping her hands under her armpits for warmth until 16 hours later when she was informed that she missed a court hearing concerning some private debt.

In that case she had missed a court hearing but in Indiana a man faced jail for just failing to pay a purely private debt.  His incarceration had nothing to do with violating a court order.   According to an online article in the Minnesota StarTibune a lawyer challenged the constitutionality of a debtor being threatened with jail for owing a debt.  The appellate judges agreed with the lawyer and he won the case because debtor’s prisons were made illegal in Indiana in the 1850s.

The article in the Star Tribune points out that there is an inconsistency with who is locked up when, and for how much debt, and that all of these things vary from state to state and county to county.  It also makes mention that no one knows how often this happens as no statistics are kept of these incidents.  One man in Illinois was locked up by a judge “indefinitely” for owing $300 to a lumber yard.

Now it seems that the collection agents are influencing the legal system more and more to be more creditor friendly.   Some would say that the collectors are subverting the legal system and using the threat of jail and jail time extract money from people who cannot afford to pay anything towards these privately held debts.

The good news is though that bankruptcy can remove most debts from your balance sheet.  After a bankruptcy discharge you legally no longer owe the debts anymore so no creditor can try to collect on them or try to get you put in jail if you don’t.  Your legal obligation to pay these debts is eliminated.  With debt collectors gaining in power and money and influence this is a very good thing.

In California I know that the courts can threaten jail if you do not attend the court ordered “debtor’s exam”.  This is where a creditor can ask you all sorts of personal questions about your assets and your financial situation.  The courts cannot jail you if you do not pay the creditor in California but they threaten to jail you if you don’t show up for the court ordered exam.

I filed a case for a client the day before his debtor’s exam and he brought his bankruptcy case number to the debtor’s exam.  The other attorney did not know what to do but the judge threw the whole case out right there and told her to go to bankruptcy court for any money.  My client had nothing and the creditor had no reason to declare his debts non-dischargeable so that is the last we ever saw of the creditor.  My client got his discharge without a problem.  Bankruptcy is indeed a powerful mechanism to defeat over-zealous creditors.

You almost always don’t have to argue whether you owe a debt after bankruptcy and you don’t have to argue whether any punishment is constitutional.  I wrote another blog about debtor’s prisons here: http://bit.ly/JmsMFt .

I am a bankruptcy lawyer practicing bankruptcy law in San Diego California.   For more information related to debt, bankruptcy, or debtor’s prison please visit my websites at www.farquharlaw.com and www.freshstartsandiego.com.  Or call me directly for a free consultation at (619) 702-5015.  Call now for free credit report and analysis! 

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Don’t put you head in the sand- your creditors will not stop hounding you until you pay them or file bankruptcy!

Many of my clients have debts that are very old.  Collection agents have long since been brought in and my clients are being called on the phone sometimes 20 times a day to pay these debts.  It’s especially vexing if you have a number of these collectors each trying to call you numerous times a day.  Most people in this position have long since stopped answering the phone.

Creditor harassment can really affect your life.  It makes you constantly uptight, nervous and upset.   You know in the back of your mind that something must be done about these debts.  Many people can get seriously depressed about their debt.  This can lead to all sorts of bad consequences.  If this is you or someone you know then read this.

The point of all this is why live this way when it is totally unnecessary?  There is an alternative to this and it is filing bankruptcy.  By the time these collectors are calling you this often on this many debts its clear that you cannot pay them.  Its time to get your head out of the sand and admit the reality that is staring you in the face.

These collectors will not stop pursuing you and they will call, fax, e-mail, and send you letters continuously until something is done about the debt.  If they can’t get ahold of you for an extended period then they will usually file a lawsuit against you in state court.  This filing goes on your credit report and should be avoided if possible.

Once these creditors get a judgment against you in state court they will use all available attempts to collect on that judgment like garnishing your wages, seizing you bank accounts, putting a lien on your real estate, or getting you into court for a debtor’s exam.  If you miss the debtor’s exam they can issue a warrant for your arrest.

I know this because one of my clients got one of these debtor’s exam notices recently.  In his case we were able to file his bankruptcy the night before he was due in court and that stopped the whole collection process.   The point is though that all of these things are bad for you and they can only cause you trouble or loss of money, probably both.

The good news is that filing bankruptcy stops all of this whether you have been sued or not.  Please stop trying to avoid the reality of the debts.  Don’t be the ostrich!  Bankruptcy, debt relief, happiness and freedom are only a phone call away!

I am a bankruptcy attorney practicing in San Diego.  For further help please visit my website at www.farquharlaw.com.