The Return of Debtor's Prison
Most people think of debtor's prison as a thing of the past
in this country. In fact, at a federal level, the United States
abolished imprisonment for unpaid debts in 1833. Many states
ended the practice around the same time, and by the 1850s most
state constitutions had clauses prohibiting the jailing of people
for debts. Some legal scholars would even argue that there is
no such thing as imprisonment for debt here now. But is that
really true? Let's take a look...
It is now generally considered unconstitutional in the United
States to jail someone for not paying a debt, yet six states
(Arkansas, Arizona, Illinois, Indiana, Minnesota, and Washington
State) allow creditors to seek arrest warrants for debtors in
default when other methods have failed. To avoid the constitutional
issues, the charge facing these debtors is technically contempt
of court. But if a man or woman is jailed for not paying debts,
and the price of freedom is conveniently the same amount as the
debt (read further for an explanation of that), doesn't that
sound a lot like a debtor's prison?
In fact, although perhaps not by intention, this method of
collection really has brought back imprisonment for debt. I have
a friend who once spent time in jail for not paying a couple
dollars in library fines for a late book return.
What has really changed in recent years, though, is that credit
card companies and other creditors, rather than simply charging
off bad debts as they used to do after six months or so of non-payment,
now sell them. There are companies that buy these debts for pennies
on the dollar ($110 billion in face value in one recent year).
Buyers get little information beyond names, addresses, account
numbers and balances, but this is enough to file a lawsuit for
Many debtors don't even know they are being sued, because
they have moved and so never receive court papers. In fact, if
you are sued because your name is similar to a debtor, and a
default judgment is issued because you never got served papers
and so never showed in court, you are legally obligated to pay
the debt. When the judgment is issued, a debtor is supposed to
complete a financial disclosure form to help the creditor collect,
if this too is sent to an old address - as they often are - the
creditor obtains an order compelling the debtor to show up in
court to explain why the form wasn't completed. This will usually
be sent to the same address that didn't work the first or second
time, and when the debtor doesn't appear in court, he or she
is held in contempt and an arrest warrant is issued.
Debtors are sometimes "substitute served" at an
old address. that means the server or processor knocks on the
door, and after the occupant says he has never heard of the debtor,
the papers are dropped at the doorstep anyhow. The papers are
then considered served.
Reason magazine, in their November 2010 issue, reported on
a case in which a man in Illinois was sententenced to "indefinite
incarceration" until he paid a $300 debt owed to a lumber
yard. The Star Tribune reported that the use of arrest warrants
against debtors went up 60% in four years, with more than 845
issued in 2009 in Minnesota alone. Although the official charge
is contempt of court (who wouldn't have contempt for courts that
operate in this way?), the bail is often set at exactly what
is owed and goes to the creditor. Again, this sounds suspiciously
like debtor's prison.
Americas largest companies and the people who run them get
out of paying debts without a problem. They even get billions
handed to them by government to help them out. Meanwhile, individuals
who do not have such clout can once again go to jail for something
as simple as owing $80 on a credit card. The beneficiaries of
this new system are some of the largest companies around. Once
again big businesses have found a way to get government to do
their bidding in our system of crony-capitalism.
Note: I am generally a beliver in free markets at heart,
but what we have is not a system of free markets or fair trade.
It is in no sense laissez-faire capitalism. We have developed
a system where money buys access to law makers and so makes the
laws, and the return of debtor's prisons is just one of the results.
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