Thursday, July 15, 2010

Ignoring a Debt May Land You in Jail

It is not a crime to owe company money unless it's the IRS. Laws such as the Fair Debt Practices Collection Acts were implemented to protect consumers from scandalous, immoral and illegal practices of companies but recently these laws have been bypassed and courts and now sending consumers to jail for owing a debt. Companies are increasingly using the courts to send consumers to jail. This is another example of companies abusing the system and getting away with it.

One woman in Minnesota was arrested after visiting with her mother because she missed a court hearing for an unpaid debt. Arrest warrants against debtors have jumped 60% over the past 4 years. Not every warrant results in an arrest, but in Minnesota many debtors spend up to 48 hours in cells with criminals.

Attorneys for consumers state that these type of arrests are increasing in many states, including Illinois, Indiana, Arkansas, Arizona and Washington, fueled by a slow economy, high consumer debt and a growing collection industry that buys outstanding debts any means possible to get the money owed. Getting locked up for an outstanding arrest warrant related to a debt depends on where you live, laws vary state by state and enforcement is inconsistent.

Some consumers have to remain in jail until they come up with the minimum payment for the debt. Debt collectors are abusing the legal system and using it to intimidate people and the legal system is allowing it. Debt collectors feel that they are doing nothing wrong.

If the consumer has been unable to pay the bill previously, they certainly won't be able to get the money to pay the debt after being sent to jail. You are sent to jail for the arrest warrant for not appearing in court, not because you owe a debt. Consumers are not charged with a crime but could be held in a jail cell with criminals.

Unfortunately, taxpayers are paying the bill for arresting and putting consumers in jail for outstanding debts. In Minnesota some judges set bail for the amount owed to the debt collector and in some cases for those who owed as less than $90.

Debt Equities LLC, Portfolio Recovery Associates and Unifund CCR Partners, Inc, Encore Capital Group, Resurgence Financial, Capital One Bank, Lakes Gas Co., Forest Lake Propane and Debt Equities are some of the largest companies that follow this practice. In some cases, consumers after receiving a notice to appear in court are required to fill out a financial disclosure to list all of their bank accounts and any assets which allows debt collectors to garnish their paycheck or bank accounts.

In many cases the debts are more than 4 or 5 years old and are purchased from companies for a few pennies on the dollar. Automated phone dialing systems are used to contact the consumers. Debt collectors cannot tack on extra fees and interest to the original debt owed unless the state law allows it. Telling a consumer that they will go to jail for failing to pay a debt is a violation of the Fair Debt Collection Practices Act.

In many cases, paperwork is not properly filled out and consumers are not notified that they have an outstanding arrest warrant which is against the law. You must be properly notified of the warrant. When you get to court be sure to let the judge know that you were never notified of the outstanding arrest warrant and the case should be thrown out of court. If not, seek legal advice.

One company that is trying to change legislation against debt collectors is Legal Aid. Contact your state congressman to ask them to change the laws to prevent creditors and debt collectors from sending consumers to jail for failing to pay an outstanding debt. Here are 6 tips to avoid getting a warrant and what to do if you receive one.

1. Read documents sent from collectors. You may not remember if you owe the debt or not but you can request a "debt validation" and the company by law is required to provide proof that you owe the debt. One you receive proof, work with the company to setup a payment plan. Don't provide the company with a check or bank account information because they will use this to garnish your paycheck.

2. Summons. If you get a summons to appear in court this means that you are being sued by a debt collector or creditor. The summons can be hand delivered or sent by mail and does not require that it is filed in court first.

3. Respond promptly. Respond promptly to a summons either admitting or denying the debt and providing proof to support your response. Send the information to the company who sent the summons and send a copy to the court clerk along with the case number. Send both copies certified mail with a return receipt.

4. Admittance. If you admit to the debt, and are unable to make the court date, don't ignore it. Ask to have the date changed. Make sure you get a letter in writing with the new date, if not, contact the court prior to the original date to make sure they know you responded to the notice.

5. Statute of limitations. Know the rights for collecting money on outstanding debts by finding out the statute of limitations in your state. In some states, debt collectors cannot request judgments after 5 or 6 years.

6. Seek legal advice. If you are unable to hire a lawyer, ask the clerk of the court about volunteer or pro bono attorneys who can specialize in collection account cases to assist you.

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