Incarceration Over Unpaid Debts On The Upswing? De Facto 'Debtors' Prisons' May Be Making A Comeback As Market For 'Zombie Debt' Zooms
In Anoka, Minnesota, the Minneapolis Star Tribune reports:
- As a sheriff's deputy dumped the contents of Joy Uhlmeyer's purse into a sealed bag, she begged to know why she had just been arrested while driving home to Richfield after an Easter visit with her elderly mother.
- No one had an answer. Uhlmeyer spent a sleepless night in a frigid Anoka County holding cell, her hands tucked under her armpits for warmth. Then, handcuffed in a squad car, she was taken to downtown Minneapolis for booking. Finally, after 16 hours in limbo, jail officials fingerprinted Uhlmeyer and explained her offense -- missing a court hearing over an unpaid debt. "They have no right to do this to me," said the 57-year-old patient care advocate, her voice as soft as a whisper. "Not for a stupid credit card
."(1)
- It's not a crime to owe money, and debtors' prisons were abolished in the United States in the 19th century. But people are routinely being thrown in jail for failing to pay debts. In Minnesota, which has some of the most creditor-friendly laws in the country, the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009, a Star Tribune analysis of state court data has found.
- Not every warrant results in an arrest, but in Minnesota many debtors spend up to 48 hours in cells with criminals. Consumer attorneys say such arrests are increasing in many states, including Arkansas, Arizona and Washington, driven by a bad economy, high consumer debt and a growing industry that buys bad debts and employs every means available to collect.
- Whether a debtor is locked up depends largely on where the person lives, because enforcement is inconsistent from state to state, and even county to county. In Illinois and southwest Indiana, some judges jail debtors for missing court-ordered debt payments. In extreme cases, people stay in jail until they raise a minimum payment. In January, a judge sentenced a Kenney, Ill., man "to indefinite incarceration" until he came up with $300 toward a lumber yard debt.
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- How often are debtors arrested across the country? No one can say. No national statistics are kept, and the practice is largely unnoticed outside legal circles. "My suspicion is the debt collection industry does not want the world to know these arrests are happening, because the practice would be widely condemned," said Robert Hobbs, deputy director of the National Consumer Law Center in Boston.
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- The laws allowing for the arrest of someone for an unpaid debt are not new. What is new is the rise of well-funded, aggressive and centralized collection firms, in many cases run by attorneys, that buy up unpaid debt and use the courts to collect.
- Three debt buyers -- Unifund CCR Partners, Portfolio Recovery Associates Inc. and Debt Equities LLC -- accounted for 15 percent of all debt-related arrest warrants issued in Minnesota since 2005, court data
show.(2) The debt buyers also file tens of thousands of other collection actions in the state, seeking court orders to make people pay. The debts -- often five or six years old -- are purchased from companies like cellphone providers and credit card issuers, and cost a few cents on the dollar.
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- Todd Lansky, chief operating officer at Resurgence Financial LLC, a Northbrook, Ill.-based debt buyer, said firms like his operate within the law, which says people who ignore court orders can be arrested for contempt. By the time a warrant is issued, a debtor may have been contacted up to 12 times, he said. "This is a last-ditch effort to say, 'Look, just show up in court,'" he said.
- Few debtors realize they can land in jail simply for ignoring debt-collection legal matters. Debtors also may not recognize the names of companies seeking to collect old debts. Some people are contacted by three or four firms as delinquent debts are bought and sold multiple times after the original creditor writes off the account.
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- A year ago, Legal Aid attorneys proposed a change in state law that would have required law enforcement officials to let debtors fill out financial disclosure forms when they are apprehended rather than book them into jail. No legislator introduced the measure.
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- Many debtors, like Robert Vee, 36, of Brooklyn Park, get a second surprise after being arrested -- their bail is exactly the amount of money owed. Hennepin County automatically sets bail at the judgment amount or $2,500, whichever is less. This policy was adopted four years ago in response to the high volume of debtor default cases, say court officials. Some judges say the practice distorts the purpose of bail, which is to make sure people show up in court.
For more, see In jail for being in debt (You committed no crime, but an officer is knocking on your door. More Minnesotans are surprised to find themselves being locked up over debts).
In related stories, see:
- St. Petersburg Times: Debtors' prison— again (In a little-noticed trend blamed on the state's hard economic times, several courts in Florida have resurrected the de facto debtor's prison — having thousands of Floridians jailed for failing to pay assessed court fees and fines),
- Atlanta Journal Constitution: Deal frees 'debtor prison' woman (A woman held in a halfway house for months beyond her original sentence because she could not pay a $705 fine was released Tuesday after an agreement between the state Department of Corrections and the Southern Center for Human Rights. Ora Lee Hurley had been caught in a legal Catch-22 that kept her confined to the Gateway Diversion Center in Atlanta for eight months beyond her initial 120-day sentence for a probation violation),
- AlterNet: Owe Money? Be Careful, or You Might End Up in Jail (Owing money is not a criminal offense in the USA. But big business has found a way to end-run this process. Reports of mild-mannered Americans getting arrested for being in debt are starting to pop up in states across the country. All over the Net, we've been reading about these poor saps snatched off the street -- right in front of their horrified children -- by glowering cops and locked up just for missing a few credit card payments),
- Public News Service: A Return to Debtor’s Prisons? (Debtor's prisons were outlawed in the 19th century, but recent practices by debt collectors in Iowa have civil rights experts wondering if the prisons are back in a new form. Here's the tactic being used by some collection agencies - ask a judge to issue a warrant for the arrest of a debtor if they don't make good on a court-ordered payment).
(1) Reportedly, Uhlmeyer walked free after her nephew posted $2,500 bail. It took another $187 to retrieve her car from the city impound lot. Her 86-year-old mother later asked why she didn't call home after leaving Duluth. Not wanting to tell the truth, Uhlmeyer said her car broke down and her cell phone died.
(2) See Top Five Companies Using Debt Arrest Warrants in Minnesota (To their credit, the Minneapolis Star Tribune confesses to using these warrants four times during 2005-2009).
