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Are debtors prisons coming back?

Not really, but reports indicate more Americans are being threatened with jail -- or jailed -- for failing to pay their bills.

By doubleace Mar 22, 2011 1:00PM

This post comes from Lynn Mucken at MSN Money.


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.


Surprised? You wouldn't be if you thought about it for a bit. Judges occasionally jail a parent who fails to pay court-ordered child support, but only after going to considerable effort to extract the money in other ways, and usually only if the courts believe the parent can afford to pay.


And there are still "pay the fine or …" judgments, although community service in lieu of slammer time is the preferred option these civilized days.


Popping up more often, however, are cases where people go to jail for failure to pay their personal debts to businesses.  Post continues after video.

According to The Wall Street Journal, more than a third of all U.S. states allow jailing of debtors who can't or won't pay. Its survey of nine counties with a total population of 13.6 million showed that judges have signed off on more than 5,000 such warrants since the start of 2010.


The Star Tribune of Minneapolis-St. Paul detailed one case:


Jack Hinton of Kenney, Ill., was sentenced to jail indefinitely after falling behind on a court order that he pay $150 a month on a debt of $6,440. Hinton, a self-employed roofing contractor, said he had broken his neck and back in a fall, but the judge noted that Hinton used $1,000 for other bills rather than his court-ordered payments. He was ordered to the county jail until he could come up with $300.


After three hours in a holding cell, his wife got him released by borrowing on a credit card. "I couldn't pay, and I was stuck in jail until I did," Hinton said. "How is that any different from debtors prison?"


The WSJ reported on a couple of recent jailings:

  • Easy Money Express, a Paducah, Ky., payday lender, won arrest warrants against at least four customers, one of whom spent five days jail after failing to pay a $275 debt.
  • Emmie Nichols, 26, was arrested at her mother's house in Platt County, Ill., after lawyers for Capital One Financial won an arrest warrant against her for skipping a court hearing about $1,159.87 she owed on a credit card. The $500 bond that freed Nichols from the county jail was turned over to Capital One as a partial payment of the debt. 

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."


Of course, the fear factor is what makes the collection system work. That, and the relentless pursuit.


Debt collectors defend the practice, saying phone calls, letters and legal actions aren't always enough to get people to pay.

"Admittedly, it's a harsh sanction," said Steven Rosso, a partner in the Como Law Firm of St. Paul, which does collections work. "But sometimes, it's the only sanction we have."


Is it legal? Experts disagree, the Star Tribune found.


In states such as Indiana and Illinois, people are being locked up for not making court-ordered payments. Known as "pay or stay," it can mean days in jail and multiple arrests for the same debt. Some legal experts say the practice is unconstitutional because the arrest is directly linked to the failure to pay a debt.


In other states, the issue is less clear because warrants to arrest debtors are issued for disobeying court orders, such as not filling out a financial disclosure form or missing a required hearing, not for failure to pay debt. So long as someone fulfills the court order, they can avoid incarceration.


"It looks on the surface like debtors prison," said William Ross, a law professor at Samford University's Cumberland School of Law in Birmingham, Ala. "But it's really not, because the person isn't being punished for the debt, but for failing to appear."


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.

And then there is the opinion of Illinois Circuit Court Judge Chris Freese. "I wish I could do it more," Freese, who has heard hundreds of debt-collection cases, told the WSJ. "It's often the only remedy to get people into court and paying their debts."


How often are debtors arrested across the country? No national statistics are kept, and until recently the practice has gone largely unnoticed outside legal circles.


"My suspicion is the debt collection industry does not want the world to know these arrests are happening," Robert Hobbs of the National Consumer Law Center in Boston told the Star Tribune, "because the practice would be widely condemned."


Would it? Public support/disapproval, as with its attitude toward the welfare system, likely depends on the details of each individual case. Some people have received a raw deal in life, and others just want things without paying for them.


 More from MSN Money:

108Comments
Mar 22, 2011 9:37PM
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my credit is excellent, my debt very low. BUT, if I am ever incarcerated for debt, that is the day i drop out of the system. i would stay in prison, i would never work an above the table job again. the credit companies would never see a penny of their money and i would find ways to steal from them. who knows where this would lead? when good upstanding citizens are crushed in an unethical system that bails out the irresponsible lenders and speculators, when the politicians are in big businesses pockets, who really knows what the future holds?

Mar 22, 2011 9:10PM
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Amazing story. After all the business bailouts, corporate fraud, political cheats they are putting us in jail.

To this I would have to say, "Lock and load".

Mar 22, 2011 8:00PM
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The selling off of debts to other collectors should be outlawed completely.  The institutions that do it are already writing it off as a loss and get a tax break.  Debts never used to be sold.  As far as I'm concerned if another debt collector were to come after me when the first one already wrote it off, I don't care that they bought it or not, I don't owe them because I didn't borrow it from them. 

Debt collectors like that should be forced to shut down because they're nothing but scumbags.

Mar 22, 2011 10:43PM
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Really?! In a time such as this where people are struggling to make ends meet... we are going to put them in jail until they pay?! And how exactly are they supposed to get the money if they are sitting in jail?!

And how many of those wealthy CEO's and fat cats are being put in jail for putting the screws to so many people and putting us in the position to not be able to pay our bills. Because ultimately, they brought down the market which caused businesses to be unable to pay their employees. When do we get to see that?!

Mar 22, 2011 4:18PM
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Nah, just being sarcastic.  This is just one more example of how this country only represents those people with the biggest campaign contributions, the most lobbyists and doesn't give a crap about the average person.  We wage wars with the excuse of freeing the people and supporting democracy.  How about we free our own people from crooks like the banks with their modern day slavery called debt?  Elections don't mean Jack - just a puppet show to give the psychological illusion of freedom and choice.  One more reminder that we need an American Jasmine Revolution to fix a beyond repair system. 
Mar 22, 2011 4:36PM
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I never understood how putting someone in jail is going to get the debt paid. Whatever happened to garnishment?  People are hurting out here, in the real world.  People are unemployed, out of benefits, living under bridges and they are worried about small debts under $2,000.00??? While all the con artists on Wall Street are living large, out of touch with reality.  The working people and taxpaying 'middle class' (what's left of it) is getting really really tired of being pinched for every little thing every time we turn around. These companies can write this stuff off, for chrissakes...I worked for Merrill Lynch in the early 90's and you know the ones who bitched the most and loudest about fees? The freaking millionaires, not the regular guy with a 401k...and Merrill ALWAYS wrote off fees for the big fish, the 'whales' who had tons of money with them.  NOT FAIR, NOT RIGHT. THE SAME RULES HAVE TO APPLY TO EVERYONE. And for those of you so quick to say "oh you have to live within your means..." Yeah, well what if the freaking game changed on you? What if you had a great job one day and by the end of that day you are laid off, no job, no benefits, you have a mortgage note, a car note, utilities...and if you have kids, oh my God, money going out left and right for their needs...you think I'm going to give a crap about a credit card bill?  I pay cash for everything.  If I cannot afford it I DO NOT NEED IT.  These banks make me sick.  So, what - now if you are in foreclosure, can the bank send you to jail now? This is Bull$hit, big time.
Mar 22, 2011 6:55PM
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You know... maybe the government should use this tactic when dealing with all the banks we bailed out.
Mar 23, 2011 6:19AM
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How about the phone bill that was owed for $200 and was disputed by the wife??  That was about a year ago.  Now it is $1,115.  They offered to settle recently for $515.  If the $200 was incorrect...what does that make the $1,115 and the $515??  There is nothing fair about what is happening with regard to people who cannot pay.  I am so sick of the "holier than thou" people who talk about how great  they have been to use their wits and are in perfect shape, money wise.  Good for you, but there are ones of us out there, who have had losses in one form or another and cannot get back up off the ground.  I beat my cancer, but dont think I can beat the bills, banks and collection agencies.  I think death will get me before they get their money, however.
Mar 22, 2011 6:05PM
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Someone who is unable to pay their bills deserves sympathy and help. Someone who intentionally skips out on paying for goods or services deserves to be punished.

Mar 22, 2011 6:12PM
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This is absurd. 

 Wall Street gangsters get billions for a bail out and then never use the money for what it's intended. 

 One of them, our former Treasury secretary, received over $400 million in "bonus" money , and then guess what? He NEVER PAID A DIME towards income tax on that bonus.  Watch the documentary, "Inside Job", which is available thru Netflix.  It's eye opening and sickening. 

Oh, and it should be required viewing for all taxpayers.

Booo hissssss 
Mar 22, 2011 9:00PM
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WE THE PEOPLE should get behind debtors prisons, after all what better way to get people to pay their debts than to put them in prison. If they go to prison then they could lose their job and not have enough money to pay their debt which would keep them in prison. What a wonderful circle to put this person in. I also think that interest should acrue on their debt so its harder for them to pay their debt down while they are in prison, this way they end up spending the rest of their life in prison. The only exception to this rule is that we should let big corporations get away without paying debt by bailing them out of financial situations with our tax dollars. OH BY THE WAY IF YOU CAN'T TELL I'M BEING SARCASTIC.
Mar 22, 2011 6:22PM
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Most debtors do not go out of their way, saying, "let me run of thousands of dollars in debt and then not pay it."  Most people end up in serious debt due to multiple traumatic events, like losing a job and then having a devastating illness.  To survive, they use credit - you know - for food, clothing and shelter.  ID thieves are blatant and look to screw us over financially, not those that have truly suffered.  You cannot make the statement that all debtors are losers trying to get something for free.  Most really try to make the payments and dig themselves out.  Most debt is the result of medical/hospital bills, taxes or other big obligations that suck up the income and leave debtors no choice but to bail on credit card payments.  Also, once a payment is missed or late, the interest rates are jacked up so high, the person cannot afford the payments anymore. It is a vicious cycle, and those that do not have debt should not be voicing such negative opinions of those that do.  After all, you may be only one big life event away from joining those ranks...
Mar 22, 2011 9:32PM
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Same old, same old: steal a loaf a bread and go to prison, steal a railroad and go to Congress....There are actually some worse things not included in the article: the people who buy the old debts then of course send you a notice of collection for them. If you fail to respond in 30 days, then you have validated the claim -- even though the debt may be past the statute of limitations, or invalid in other ways
....
None of this even starts to look at the extreme measures allowed businesses to protect intellectual property or rights: people drug into court for downloading cd's or movies!  The penalties are higher than for manslaughter. 
....
All of this shows you why we need to turn off the television and get involved in the day to day of politics: this is essential to survive.  
Mar 22, 2011 4:37PM
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We trout around the world defending and safeguarding the "rights" of people in other nations, and this is what we do to ours????? Guess the corporate potentates have spoken.
Mar 23, 2011 1:39AM
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proof positive that the US is becoming a fascist country... if corporations adopt and/or sponsor bills that facilitate putting "debtors" in jail, it's the very definition.
Mar 22, 2011 6:24PM
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It is disturbing that Collection Agencies and PayDay Loan Companies can manipulate the legal system to jail debtors. First of all Collection Agencies typically buy Credit Card Debt from Issuers that have already factored in an approximate default rate of 5% into their 18% plus interest rates charged and substantial "penalty" fees. So essentially our Legal System subsidizes the Collection Agencies who buy debt for literally pennies on the dollar and then use tax-payer funded Courts, Police and Jails to enrich themselves. Secondly, PayDay Loan Companies also build a substantial default rate into their sky-high "Charges" and then they too use tax-payer supported Courts, Police and Jails to recover those monies that supposedly "losing" also justifies their exorbitant rates in the first place. It seems that this "debtor-to-prison" scenario benefits no one other than the already greedy who already specifically target the financially weak. THIS IS A TRAGEDY THAT EVEN RELATIVELY PRIMITIVE 19TH CENTURY MORALITY CONDEMNED 178 YEARS AGO WHEN IT ELIMINATED DEBTOR'S PRISONS IN 1833 !!!
Mar 22, 2011 5:19PM
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The telling passage from the story is  " He was ordered to the county jail until he could come up with $300".  How is a man going to work when he is in jail.  Plus, if he had a job previously, he does not anymore when his boss finds out he's been locked up.  He will inevitably lose his job because his company will consider him not the "right kind of people" they want working for them.  So how is that constructive?  It is a devolving self destructive cycle.
Mar 22, 2011 4:49PM
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"People should not be afraid of their governments. Governments should be afraid of their people". The corporate stranglehold on America works because MOST people ARE sheep and allow it. We don't read the abusive contracts that tell you if life gives you a hiccup, the credit card company will give you 29.9% interest. We sign off on the free money card and go about our way. Some people are overburdened by medical expenses, but some people have been living (for a very long time) with a consumer mentality and well beyond their means. I am a mediator that talks everyday to people being sued by their creditors and cannot afford to pay their debts. You would be surprised how many of those people at sometime in the mediation process admit to buying a new car or just getting back from an exotic vacation. I talk to a lot of hard working people too. Good people who are being taken advantage of by a corrupt system. We NEED a revolution and a complete reform of everybody... politicians, civilians & corporations alike. The more Americans fight each other for a buck, the more we lose to every other country waiting for us to fall like the Holy Roman Empire. Oh well America. Your funeral.
Mar 23, 2011 12:38AM
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CHILD SUPPORT CASES: When The Courts Create 'Non-Custodial Parents' They Are Realy

Creating 'Sub-Class Citizens' With Diminished Rights Who Are Being Criminalized  Without Rights To Public Defenders And Ordering Them To Pay A Government Assigned Debt Which

Forces Them To Labor For Wages Well Below The Poverty Line Under Threat of Jail Time

For Over 18 Years And These Government Assigned Debts Are Exempt From Bankruptcy Claims. . . You Cannot File Bankruptcy Against A Government Assigned Debt.

 

Under US Civil Code 42 USC 666 'Which Is Also A Global Civil Code' The Courts Are Also

Ordering Non-Custodial Parents To Purchase Health Care Insurance Wether They Want It; Need It; Can Afford It or Not. . . If Court Ordered Child Support & Court Ordered Health Care

Insurance Bankrupts You. . . Tuff **** And Good Luck With Obamas Health Care Mandate

Which Is Also A Government Assigned Debt Exempt From Bankruptcy Claims And Ruled

To Be Un-Constitutional & Illegal.  

 

The Courts & Judges of Civil Code 42 USC 666 Are Corrupt & Criminal.   

   

Mar 22, 2011 6:38PM
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If you think we are on equal footing in this country with corporations - think again.  They are not even people, but are considered legal persons.  Not only are they considered legal persons, but they have more rights than real human beings do.  I went to a lawyer to sue my old employer for not paying me what was owed for two weeks of work.  The lawyer said to me it isn't worth it - that I will spend more in legal fees than I will gain from winning the lawsuit.  Why isn't my old employer in jail then if regular people can be sent there for not paying their debts?  Because they have more rights than we do.  Until we stand up and demand change we will get more of the same.  Unfortunately, there is going to have to be a revolution in this country or we all become slaves to the corporation.  I hate this country and world more everyday. 
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