Debtor's Prisons Making a Comeback for Those With Unpaid Bills
7/20/2010
Source: By Joan Firstenberg, DigitalJournal.com

Let the punishment fit the crime. But is it wise to return to the 1800s and throw people who don't pay their bills into prison?

Debtors prisons were abolished by the federal government of the United States in the 1800s. But Walletpop.com reports that in this tight economy, they're making an unwanted return.

Minnesota is one state where there are reports of Americans being thrown in jail because of outstanding bills, which are sometimes as little as $85. The Star-Tribune of Minneapolis has begun to profile the people in the area who say their debts put them in jail. Joy Uhlmeyer is a 57-year-old patient care advocate who was pulled over on her way home from visiting her elderly mother and put in jail for one night after she missed a court hearing about her debts.

The Star-Tribune says its research of the state's court documents shows that arrests like Uhlmeyers rose 60% in Minnesota during the past four years. And this is happening in more states than Minnesota. Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Groups (or PIRG), calls this a "very bad situation for consumers." Mierzwinski pins the problem on what he calls,

"Bottom-feeder debt collectors [who] are very aggressive."

The people who wind up going to prison for their debts are getting caught in a legal loophole which is they are technically being locked up for contempt of court after not appearing for a hearing on their debt. It's a practice being used increasingly by debt-collection companies. The way it works is that first the collections agency files a lawsuit against the debtor, which requires them to make a court appearance. If the debtor doesn't show up, the creditor wins a default judgment against them, which enables the court to set up another hearing where the judge will go through the debtor's assets and determine some action to be taken. That would include garnishing wages or seizing bank accounts.
This is the crucial hearing for the debtor to attend. If the debtor doesn't show, the judge can order him or her in contempt of court and issue a warrant for their arrest. And once in jail, the debtors problems only increase since the judge usually sets the bail at the amount of the dispute debt, an amount that is then handed over to the creditors.

Lawyer Pete Barry, a partner at the firm of Barry & Slade LLC says this is outrageous.
"This is the private use of government resources to collect debt. They're using the court system as their collection agent."

Barry says one of his clients was arrested at her office after she didn't fill out and send back a form sent to her by her creditor. His says his client suffered the humiliation of having to have her boss come to the jail and post a bond before she could be released and then the bond money brought by her boss, was turned over to the creditor.

Ira Rhinegold, executive director of the National Association of Consumer Advocates says,
"There are big issues. Minnesota isn't the only place it's happening, but it seems to be the worst. They're leading the way."

Rhinegold says they've heard of similar stories out of Wisconsin, New Jersey, Arkansas and Washington.

Gail Hillebrand, financial services campaign manager for the nonprofit Consumers Union says consumers have to be aware of this practice. She warns that debtors must respond to letter from creditors that threaten legal action and require a court appearance. And she notes, don't be fooled if the collector's name keeps changing since the debt is probably being sold and resold.

Hillibrand also advises consumers to do their research to determine whether the debt is really theirs. If it isn't it can be disputed. And even if it turns out to be yours, she says, that just showing up in court can sometimes lead to a favorable outcome.