America's Modern-Day Debtor's Prison

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When I used to write about bankruptcy, I would point out that at some point, it's not worth time and energy trying to get blood from a stone.  "This is why we no longer have debtor's prisons," I would explain airily.


Well, the last few years have shown me that this is not exactly true:

In September, Vivian Joy, 53 years old, was handcuffed and taken to a jail in Champaign, Ill., after being stopped for driving with a broken taillight. A public-records search by the police had shown an outstanding arrest warrant because Ms. Joy didn't appear in court following a default judgment against her over $2,200 owed to Champaign Heights Finance Corp., based in Peoria, Ill.

"They cuffed me in front of my kids. That was terrifying," said Ms. Joy, who claims she didn't know about the lawsuit or judge's order until her arrest. She said she owes the money but can't afford to pay because she has no job.

Ms. Joy was released after she posted a $120 bond. The finance company and police officials couldn't be reached for comment about the arrest warrant.
Okay, so it's not exactly debtor's prison--they don't keep you there.  But this is appalling on so many levels that I don't even know where to begin.

I am sure that these warrants do catch a few people who just decided not to bother repaying the finance company because why should they?  Defaulting on a loan that you have the resources to repay is, of course, morally wrong.  But we do not put people in jail for every morally wrong thing that exists in the world, even some many worse than this, such as psychologically abusing your family members.

Moreover, even if we thought that it was okay to put people in jail for being deadbeats--and I'm sure that somewhere in the United States there are some examples egregious enough that even bleeding heart liberals would say "Slap some cuffs on that bastard!"--all the research I've ever seen indicates that among those who default on their loans, true deadbeats are a minority.  A not-insubstantial minority, to be sure.  But still, not even close to the bulk of the problem.

No, most people who don't pay their debts are people who have gotten themselves into a whole heap of trouble, one way or another, and can't pay their debts.  They've gotten divorced, which has suddenly doubled the major expenses without also doubling the incomes of the former spouses.  Or they've gotten sick, which means not just medical bills (these are often negotiable or in extremis, forgivable) but income loss and new ancillary expenses.  They made the mistake of having a child with special needs.  Or they lost a job because, in case you haven't noticed, the economy is not so good right now.

Yes, they may have gotten to this place by some poor decision making about who to marry, what chemical substances or foods they put into their body, how much debt to take on relative to their income, or how much to save.  But these decisions are legal--as they should be.  Are we really down to slapping cuffs on people because they unwisely decided to borrow too much money?  

If so, I'm with the progressives--we should also be heading down to the finance company and slapping cuffs on the guy who approved the loan.  Fair is fair.

Leaving all of this aside, while I understand the value of pour encourager les autres, I suspect that putting people in jail does not enhance their chances of earning enough money to repay their outstanding debts.

And, of course, the fact that jail time for bad debt is likely to be a punishment directed only at the poor--the people who have no assets to seize or wages to garnish.  I failed to appear at a New York State tax hearing that I didn't know about because the State of New York, as far as I can tell, had the wrong address for me.  They seized a bunch of money out of my bank account, and I had a hell of a time getting it back and getting the judgement vacated (they were in error, as we eventually agreed).  But they didn't march me off to jail, because I had enough in my bank accounts to satisfy the judgement.

And in fact, most people who default, and don't show up to court, and don't have assets to seize, will not get sent to jail either; as far as I know, the practice is not widespread.  But that's rather besides the point. Putting people in jail for defaulting on small sums, or failing to show up at a civil hearing over same, is cruel and counterproductive and rather stupid.  It has no place in American law, no matter how rare.

Update:  My commenters argue that I am wrong, because what they are being jailed for is contempt of court for failure to appear, not the debt itself:

I used to handle some of these cases, and have a great distaste for them as well.

However David M Knights Esq is right.

They are being put in prison for contempt of court for failing to show up at court ordered asset hearings. Usually after having 2+ chances to show up in hearings to tell the judge why they missed the others. If you are in that position: just show up at the hearing. Most attorneys use the bond to get out of the contempt charge as leverage top make some payment on a debt. If you keep on showing up and telling the court you have no money, most creditors will stop pursuing you. And if they don't most judges will refuse to schedule further hearings.

I was surprised out of law school that they existed, but they do.
They also argue--a fact of which I was not aware--that at least in Illinois, these warrants are not issued unless the people are legally served by a process server.

I have a great deal of sympathy for people who figure that there's no point in going to court, since they don't have the money anyway.  On the other hand, on reflection, I understand why the court can't view response to a summons as optional.  On the third hand, the outcome seems fairly ludicrous in proportion to the underlying offense.  It seems to me that it would make sense for judges to exercise restraint.
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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