Debtors Rights Act could keep many out of prison, but some may still slip between the bars

Debtors Rights Act could keep many out of prison, but some may still slip between the bars

Most people that wind up in prison over unpaid debts owe around $250, says Beverly Yang, staff attorney at the Land of Lincoln Legal Assistance Foundation, Inc.

But their debts aren't often why they end up behind bars.

"No one can be arrested for owing money," said Michelle Weinberg, with the Legal Assistance Foundation of Chicago. But when a creditor sues an individual over unpaid debts, the judge issues a court date to show whether or not they can pay the debt.

All too frequently, said both Yang and Weinberg, the debtor never gets the notice to come to court. And when they fail to show they are placed in contempt of court, and a warrant is put out for their arrest. And that's how many end up in jail.

The Debtors Rights Act of 2012, signed by Gov. Quinn on July 25th, puts forward several measures to keep people from being locked up for their debts.

By mandating that the court must inquire into the debtor's ability to make payments before entering any kind of payment order, the bill helps protect low-income people whose only assets are social security or disability payments from being jailed if they are in contempt of court and cannot pay off their debt.

The law also keeps a creditor from taking an individual's bond after they've been arrested, and forcibly using it to repay the debts.

Yang called both these sections "victories," but noted that the law missed some essential areas that needed enhanced regulation.

The notification system is one of these. The law initially allowed an order to appear in court to be delivered through certified mail. Now, they are served personally or to a person's home.

Yang says she has seen that this is often not enough: "my biggest disappointment is that the notice provisions really haven't changed."

If the notice is delivered to the wrong house, or if someone else signs for the notice but does not deliver it to the debtor, the same problem that lands people behind bars remains, says Yang.

In addition, she said, the law doesn't apply retroactively, leaving the individuals already struggling with the issue without legal recourse.

How many does she think that faulty notice provisions and aggressive creditors have landed in court?

"I am sure that there are hundreds," said Yang, "but one is too many."

Below are the stories of two low-income people, Mr. Miller and Ms. Goodnow, jailed for their debts, from a statement by Yang delivered to the Illinois Department of Financial and Professional Regulation:

Ms. Goodnow was ordered to make payments of $100 per month on a $5,000 judgment. When she missed payments, the Court scheduled a “pay or appear” hearing. Notice of hearing was sent by regular mail, which Ms. Goodnow did not receive. Ms. Goodnow was found in contempt without a hearing on whether she had notice of the court hearing or if she had money to pay the judgment debt. She was jailed for 3 days and paid $500 bail, which was turned over to the creditor. The second time that notice of a “pay or appear” hearing was sent by regular mail, Ms. Goodnow had moved again and she did not receive notice. A bench warrant was issued without a hearing on whether she had received notice or her ability to pay. When she learned of the warrant, Ms. Goodnow paid $400 to the Plaintiff. On 2 later occasions, the creditor wrote a letter to the Court, and without setting the case for hearing on the debtor’s ability to pay, a bench warrant was issued and bond set at $750.

At the time of judgment, Mr. Miller agreed to make monthly payments of $70, even though his only income is from Social Security. When Mr. Miller missed payments, notice of a contempt hearing was sent to Mr. Miller by regular mail. He did not receive notice, failed to appear, and a bench warrant was issued. Mr. Miller was personally served with notice of the contempt finding and the $150 bond. He appeared in court to explain why he could not pay and to give the creditor $70 that he had borrowed from his sister. The creditor refused the $70 and Mr. Miller went to jail. His sister paid $150 bond, which would have been turned over to the creditor if Land of Lincoln had not intervened.

Photo Credit: :Dar 

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