Debt Collectors Are Using Loopholes To Throw Debtors In Jail

You cannot go to jail for being unable to pay your bills. That’s called debtor’s prison and America outlawed that practice in 1833. But debt collectors are trying to get around that restriction, and the result is a cycle of debt that leads people to prison for being unable to pay debts. And of course, because prison makes it hard to get or keep a job, the cycle of debt gets even worse as a result of repeated imprisonment.

How the Debt-Prison Cycle Works

Here’s how the cycle works. A collection lawsuit is filed against a consumer for an unpaid bill. Whenever a lawsuit is filed, the consumer has a right to be notified about the lawsuit so the consumer can respond, go to court, settle, or otherwise take measures to defend himself.

But sometimes, debt collectors and creditors do a poor job of notifying people of lawsuits. This is called “sewer service,” and it involves sloppy or haphazard service of lawsuits. The end result is that the consumer is not getting the legal notice that the lawsuit exists that the consumer is entitled to.

Because the consumer doesn’t know about the lawsuit, he or she doesn’t show up to court or file any paperwork in his or her defense. When that happens, a judgment is entered against the consumer.

Once the judgment is entered, the collector then asks for the consumer’s financial information to see if the consumer has the money to pay the judgment, or to see what assets the consumer has that may be taken to satisfy the judgment. The consumer—again, completely unaware any of this is going on or that there’s any lawsuit at all—doesn’t show up for the hearing to determine what his or her assets are.

Contempt Leads to Prison

Because the consumer doesn’t show up, the creditor may ask for an arrest warrant because the consumer is technically in contempt of court for not showing up to the required hearing. Remember the judge isn’t technically jailing the consumer for being unable to pay the debt, the judge is jailing the consumer for failing to show up to a court required hearing (that the consumer had no idea was even going on). And remember, the judge relies on the debt collector’s assertion that the consumer knows what’s going on in the lawsuit.

Jail Leads to Other Financial Problems

The consumer may only be jailed for a short period of time. But it’s enough to send that consumer into a financial tailspin. The consumer can lose his job, fail to pay mortgage, rent, car payments or other bills. These late payments lead to default interest rates and late fees.

Additionally, some consumers may find themselves hit with criminal fines, creating even more debt. Some of those fines may not even be dischargeable in bankruptcy.

You can avoid these kinds of problems with a bankruptcy. If you are being sued for a debt, bankruptcy may be a great option for you. Call the West Palm Beach bankruptcy lawyers at Kelley Kaplan & Eller at 561-264-6850 for help.

Resource:

vox.com/the-highlight/22327700/debt-prison-debtors-unpaid-bills