Over the past 27 years, I have been asked by many clients whether they can be jailed for failing to pay their debts. Since the United States abolished federal imprisonment for unpaid debts in 1833 (most states have also followed suit), I generally dismiss their concerns as a “myth” or “urban legend” and proceed to discuss available bankruptcy and non- bankruptcy options.
However, with the extended national economic struggles, more Americans are finding it difficult to pay their bills and collection agencies are utilizing increasingly more aggressive methods to collect on accounts. These factors are contributing to a resurgence of “modern day” debtors’ prison across the United States.
A CBS Money Watch report detailed how creditors are manipulating the Court system as a tool to aid collections and to increase their profits. Here is how it works. A lawsuit is filed and a Judgment is entered in favor of a creditor. In the collection process, a notice may be given to a Debtor, requiring a Debtor to appear in Court. If the Debtor fails to appear, a warrant may be issued for their arrest. The Debtor is not arrested for failing to pay his debts. He is arrested for failing to respond to a Court Order, or paying legal fines or otherwise showing “contempt of Court” in connection with a civil collection proceeding. Many debtors often state that they are unaware that a lawsuit had been filed or that a judgment had been entered against them in many of the examples cited. More than a third of all states allow Debtors who don’t pay their bills to be jailed, even when debtor’s prisons have been explicitly banned by state constitutions. A report by the ACLU showed that many times the cost of these incarcerations exceed the amount of the original debt owed.
Beenish Ahmed, a Kroc Fellow at NPR, highlighted the following bullet points in a recent report by NPR entitled “Unpaid Bills Land Some Debtors Behind Bars”. She reported that:
- The U.S. became an early proponent of banning debtors’ prisons, especially since up to two-thirds of Europeans who came to the colonies arrived in the New World with debt. Before the debtors’ prisons were done away with, thousands of Colonial Americans were thrown in jail for their outstanding debt — which sometimes totaled less than 60 cents.
- Although debtors’ prisons are now illegal across the country, a study by the Wall Street Journal found that more than a third of all states in the U.S. allow borrowers who can’t or won’t pay to be jailed — including those states where debtors’ prisons are explicitly prohibited by state constitutions.
- A report by the American Civil Liberties Union found that people were imprisoned even when the cost of doing so exceeded the sum total of the debt they owed. In the city of New Orleans, for example, the sheriff pays $22.39 per day for each detainee held in the Orleans Parish Prison. Sean Matthews, a homeless construction worker, was incarcerated for five months for $498 of legal debt in 2009. Matthews’ jail time cost the city $3,201.77 — more than six times the amount he owed.
- Some are even made to pay for their jail time themselves. Walter Riepen, a Michigan resident, was sentenced to 30 days in jail. After his release, he was billed $1,260 — the cost of his incarceration at a rate of $60 a day. Since his only income is a monthly Social Security disability payment, Riepen cannot pay back the amount, and the ACLU reports that he still lives under the threat of being sent back to prison for his unpaid legal financial obligations.
The advent of the use of aggressive tactics by collection agencies makes it increasingly important that consumer debtors seek out representation and to know their rights.
Michael P. Dansack, Jr.