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.