Friday, May 6, 2011

Going to Jail for Unpaid Collection Debts

I used to hear the question, "Can I go to jail for not paying a collection agency?" at least once a week. And I always used to respond the same way: NO. Unfortunately, I can't do that anymore. As it turns out, crafty collectors are hunting for ways to bend the law and toss unsuspecting debtors behind bars for their inability to pay off ancient and inflated debts.

How Debt Collectors Put Consumers in Jail for Unpaid Bills

Leaving your debts unpaid isn't illegal and the financial fallout of the recent economic crumble has left millions of Americans owing debt they cannot afford to pay. The economic crisis is a double-sided coin. Consumers are left without the money to pay their debts, while collection agencies lose revenue. The natural result is more aggressive collection methods.

The plan works like this: The collection agency files a lawsuit for the unpaid debt. The court sets a hearing date for the lawsuit. If you appear at the hearing and defend yourself, the collection agency doesn't have a case. But that's fine by the collector because over 90% of debtors fail to respond to collection agency lawsuits. Those that don't respond and don't appear in court are technically in contempt by disregarding a summons. That gives the bill collector grounds on which to swear out a warrant.

Believe it or not, it gets worse. Bill collectors are notorious for "gutter service." Gutter service occurs when a collector fails to serve you a summons prior to a lawsuit or intentionally sends your summons to the wrong address. If you aren't aware of the pending collection suit against you, there is no possible way for you to show up in court – and no way for you to compile a defense. The collection agency simply waits until you  miss the hearing before filing for a warrant and sending the sheriff to pick you up.

There Is No "Get Out of Jail Free" Card

Once you're safety behind bars, the collection agency has the upper hand. State laws vary, but some states require you to pay some or all of the debt before releasing you from jail. Unfortunately, paying anything toward a collection debt restarts the statute of limitations for lawsuits. Even if the arrest was due to your failure to appear in court after being sued that does not mean that the bill collector had the legal right to sue you in the first place. 

Under normal circumstances, you could have the collection judgment overturned merely by filing a Motion to Vacate and using the expired statute of limitations as a defense. If you have to pay a portion of the debt to be let out of jail, however, you essentially hand the collection agency the ammunition it needs to legitimize its lawsuit.

Debt Collectors That Threaten to Put You in Jail

The Fair Debt Collection Practices Act bars collectors from threatening to take any action against you that they lack the legal right to take. This includes threatening to put you in jail for not paying your debts. If you want to get technical (and I really, really do) those who are put in jail for nonpayment aren't arrested because they did not pay a collection agency. They're arrested for their failure to adhere to court orders – even if they weren't aware of those orders.

While the prospect of being hoodwinked by a collection agency and subsequently arrested is jarring, no bill collector has the right to threaten to call the police if you don't agree to make payments. Debtor's prisons were abolished in 1883. If a debt collector threatens to call the police – call the bluff, but make sure to inform the collector that his threats violate Section 810 of the FDCPA.

Forcing Payment in Full

If filing a warrant against nonpaying debtors weren't bad enough, some judges are setting bail for the exact amount the debtor owes and then turning the bail money over to the collection agency when the debtor raises enough money to free himself. Although this isn't going on in all states, its going on in Minnesota. The Minneapolis Star Tribune recently published an article detailing this exact practice. I'm linking the article below if you're interested in taking a look.

Minneapolis Star Tribune article

What You Can Do to Protect Yourself

There is no surefire way to protect yourself from unethical debt collection procedures, but you can make yourself less of a target in the following ways:

Know the age of your debt. The statute of limitations kicks in as soon as you default on the account. Keeping track of the statute of limitations means you'll know immediately whether or not a collection agency's lawsuit is legal or illegal as soon as you receive the summons. If the statute of limitations has already expired, you can use this as an affirmative defense when you file your answer – resulting in the court dismissing the debt collector's case and eliminating any chance the company may have had to have you arrested.

Never ignore a summons. In most cases, ignoring a court summons won't result in the collection agency filing a warrant for your arrest – but it will result in a judgment. Plus, answering the summons demonstrates to the collector that you are willing to fight for yourself and not an easy target.

Keep old collection letters – and the envelope too. Keeping old collection letters and the envelope they came in with your name and address clearly visible serves as proof that the collection agency knew your address when it filed its lawsuit. If a debt collector sues and you receive the summons, having the letters isn't necessary. If the collection agency uses gutter service to ensure it receives a judgment, having proof that the company participated in illegal activity in an effort to extort payment from you through an arrest gives you one heck of a case against the collector.

Tout your "judgment-proof" status. Do you lack a job? A home of your own? Nonexempt income? Being judgment-proof doesn't stop a bill collector from getting a judgment, but it does stop the collector from using the judgment to force you to pay. If you're judgment proof, make sure the collection agency knows it. Collectors want to focus their major collection efforts, such as lawsuits and sending debtors to jail, on those they can actually collect from.

Related Articles:

How to Respond to a Debt Collector's Lawsuit

Can You Reset the Statute of Limitations on a Debt?

The Debt Collection Lawsuit Threat


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