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.
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.
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.
- Calculator:Do I have too much debt?
"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:
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?
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".
Debt collectors like that should be forced to shut down because they're nothing but scumbags.
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?!
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.
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.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
ABOUT SMART SPENDING
LATEST BLOG POSTS
Are you being stalked behind the wheel? Here's how to tell and what you can do about it.
VIDEO ON MSN MONEY
BLOGS WE LIKE
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'