Unpaid Bills Land Some Debtors Behind Bars

Unpaid Bills Land Some Debtors Behind Bars
by SUSIE AN

Link to article: http://www.npr.org/2011/12/12/143274773/unpaid-bills-land-some-debtors-behind-bars?sc=tw

Although debtors' prisons are illegal across the country, it's becoming increasingly common for people to serve jail time as a result of their debt.

Collection agencies are resorting to some unusually harsh tactics to force people to pay their unpaid debt, some of whom aren't aware that lawsuits have been filed against them by creditors.

Take, for example, what happened to Robin Sanders in Illinois.

She was driving home when an officer pulled her over for having a loud muffler. But instead of sending her off with a warning, the officer arrested Sanders, and she was taken right to jail.

"That's when I found out [that] I had a warrant for failure to appear in Macoupin County. And I didn't know what it was about."

Sanders owed $730 on a medical bill. She says she didn't even know a collection agency had filed a lawsuit against her.

"They say they send out these court notices, and nobody gets them," Sanders says.

She spent four days in jail waiting for her father to raise $500 for her bail. That money was then turned over to the collection agency.

Similar stories have been reported in Indiana, Tennessee and Washington.

Here's how it happens: A company will often sell off its debt to a collection agency, generally called a creditor. That creditor files a lawsuit against the debtor requiring a court appearance. A notice to appear in court is supposed to be given to the debtor. If they fail to show up, a warrant is issued for their arrest.

Beverly Yang, a legal aid attorney with Land of Lincoln Legal Assistance, says most debtors don't know their rights.

In fact, she says, some judges don't even know debtors' rights, which could result in the debtor being intimidated into a pay agreement.

"I've seen this even when I'm standing in the court room as the legal aid attorney," Yang says. "The judge will ask if they can pay, how about $150 a month. How about $75 a month? How come you can't even pay $50 a month? Did you apply for a job last week?"

Leveraging Payments

The Federal Trade Commission received more than 140,000 complaints related to debt collection in 2010. That's nearly 25,000 more than the previous year.

Yang says some creditors are eager to use harsh tactics. "Whatever the creditors or the creditors' attorneys can do to leverage some kind of payment, it will help their profits enormously because they have, literally, millions of these."

Kevin Kelly, president of the Illinois Creditors Bar Association, says members of his organization only issue warrants in extreme situations.

"There's an assumption in what you're saying that we'd rather throw them in jail than work with them," he says. "And I don't find that to be true at all."

Sometimes it's the debtor who's keeping information from the collectors, Kelly says. That prevents important documents from getting to the right place.

He says most collectors want to make reasonable arrangements, but it's difficult when the vast majority don't respond to the notices sent to them.

Illinois Attorney General Lisa Madigan thinks more can be done. It's illegal in Illinois for people to be sent to jail because they're in debt. But Madigan thinks some creditors are abusing the law.

"You wouldn't be in that predicament if you didn't have debt," Madigan says. "But for being in debt, you wouldn't be in prison. And that essentially equates to being thrown in jail, debtors' prison."

She says courts need to be certain they have correct information to serve notices. Madigan also says judges need to be properly educated in these proceedings to prevent a debtor from needlessly going to jail.

The Illinois attorney general also says the state is investigating agencies that it thinks are abusing the law.

As for Sanders, she has a remaining balance of about $160 on her medical bill. But at least she now knows she won't have to go to jail for it.

You Just Got Sued–What Should You Do?

by Dana Wilkinson, Attorney at Law

Link to article: http://www.bankruptcylawnetwork.com/you-just-got-sued-what-should-you-do/

So far this morning, I’ve gotten two calls from clients who received suit papers over the weekend. Credit card companies (or the debt buyers who bought the accounts) have filed civil suits in state court, seeking a judgment for the amount owed. One of the suits was accompanied by a letter from the law firm that filed the suit, insisting that the client contact them immediately. Getting sued is a scary thing. So, should you hit the panic button? What does it mean, and what can you do?

A civil suit is nothing more than a request that a court decide that you owe the plaintiff money. That’s it. You are being put on notice, and you have the right to respond and dispute that you owe the money, or that the amount is incorrect, or that you don’t owe that particular claimant. It is not an arrest warrant (there are no debtors’ prisons in this country–remember 9th grade civics class?).

If you don’t file a response to the suit (called, appropriately enough, an Answer) the court will usually find in favor of the plaintiff, granting them a civil judgment in the amount they requested. If you don’t respond, you don’t usually have to attend court. Once the court grants the plaintiff a civil judgment, however, you may effectively lose the right to challenge that the amount is correct, or that you actually owe the money. As far as I know, the effect of a civil judgment in all fifty states is to become a lien on real property that you own in that jurisdiction. But that’s pretty much it. If you don’t dispute that you owe the debt, a judgment is pretty much a piece of paper that says you owe what you already knew you owed.

What comes after a judgment is granted depends on where you live and what you own. If you want to know how a civil judgment will affect you and your property, you have to consult a lawyer in your state. There is no other way to be sure, so I’m not even going to generalize here. Go see someone who can tell you about your situation. Don’t rely on your internet research skills or your brother-in-law (unless your brother-in-law is a lawyer) because every state is different, and your situation is not exactly like anyone else.

In fact, my advice to my two clients this morning was different. One is what lawyers call “judgment-proof.” That means what it sounds like–a judgment doesn’t change anything, because there is nothing the judgment creditor can do, no property for the judgment creditor to take, that will change anything for my client. The second client, who owns real property, may need to respond differently.

Bankruptcy may also be a solution. A bankruptcy can stop a suit that has been filed, and prevent a judgment from being granted. Bankruptcy can also sometimes alleviate the affect of a judgment that has already been issued. Whether is is necessary or advisable, again, depends on your situation. Only an experienced bankruptcy lawyer can tell for sure.

Oh, remember that letter I mentioned, insisting that my client contact the creditor’s lawyer immediately? The language of the letter suggested that dire consequences could result if she did not contact them. Leaving aside whether the letter is itself actionable, if you get such a letter (or phone call), remember that they are trying to get you to pay them money. Their stock in trade is to create a sense of urgency, and stampede you into making a commitment that you wouldn’t otherwise make. Again, your best defense is to consult with someone who is on your side, who can tell what you really need to worry about, and what is, as my Daddy used to say, “all bark and no bite.”

And, as a final note, don’t delay. It may be tempting to just stick your head in the sand and wait to see what happens, but remember what part of your anatomy that strategy leaves exposed. (If you need a reminder, see photo above.) Check it out, and make sure you know what can happen, and what you can do about it. You may be pleasantly surprised by the advice you receive.