While Debtors' prisons disappeared in the United States in the 1800's, present day elements of that era are being reported in certain states across the country. The sentences may not be nearly as harsh but the idea that a person could be put in jail for unpaid bills of less than $100 is unsettling, at the very least. As reported by "The Star-Tribune" in Minneapolis, arrests of people in with accounts in collections are up 60% in Minnesota over the last four years.
Missed Court Hearings
In reality, the arrests aren’t being made for missing payments; they’re being made on contempt of court charges for not showing for hearings in court regarding the missed payments. The path leading to an arrest for an account in collections usually unfolds in the following manner:
- A collections agency which has purchased the Charged Off Debt from the original creditor files a lawsuit against the debtor.
- If the debtor doesn’t know about the lawsuit or doesn’t show up, the collections agency wins a default judgment against the debtor.
- After the default judgment, the collections agency can request a second hearing to see if wage garnishment or placing liens against bank accounts are feasible.
- This hearing also requires debtors to attend, but if they don’t, the judge can issue a bench warrant for contempt of court.
- Generally speaking, bail is set at the amount owed to the collection agency.
Using the Court for Debt Collection
This raises the specter of the courts acting as collection agents for collection agencies, using public resources to pursue debts owed to private companies. It’s a loophole that collection agencies are taking advantage of in Minnesota, Wisconsin, New Jersey, Arkansas and Washington. The collection agencies work the system as well, failing to send hearing notifications to debtors regarding their court cases. This sets the contempt of court charges in motion without the knowledge of the debtors themselves.
Using Bankruptcy to Remove Debt and Stop Collection Efforts
Debtors can fight back in court as well. Filing Chapter 7 or Chapter 13 bankruptcy petition stops all collection efforts immediately with the stay remaining in force until the bankruptcy process is completed. In a Chapter 7, the end result is the discharge of the kind of unsecured debts which debt collectors are using in court to harass their debtors. The end result of a Chapter 13 filing is the establishment of a court approved payment schedule which pays some debts off with pennies on the dollar on some balances while fully discharging others.
The attorneys at Zhou & Chini know how to keep debt collectors at bay and get the best results possible for their clients. If you are being harassed by collectors or are worried about being taken to court for unpaid debts call (800) 972 9600 for a free consultation today.
