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Unpaid Debt Could Land you in Jail!

July 17, 2010

Prior to the mid 19th century debtors’ prisons were a common way to deal with unpaid debt.  Currently, the practice of giving prison sentences for unpaid debts has been mostly eliminated, with a few exceptions.  In Minnesota, judges have issued arrest warrants for people who owe as little as $85 — less than half the cost of housing an inmate overnight. Debtors targeted for arrest owed a median of $3,512 in 2009, up from $2,201 five years ago.  A judge sentenced a Kenney, Ill., man “to indefinite incarceration” until he came up with $300 toward a lumber yard debt, but it appears as though that those jailed for debts may be the least able to pay.

Portfolio Recovery Associates of Norfolk, Va., a publicly traded debt buyer with the biggest profits and market capitalization, earned $44 million last year on $281 million in revenue — a 16 percent net margin. Encore Capital Group, another large debt buyer based in San Diego, had a margin last year of 10 percent. By comparison, Wal-Mart’s profit margin was 3.5 percent.

How do debtors end up in jail?

  • It seems that in some rare cases an arrest warrant can be issued for contempt of court.
  • If a collector tries to contact you to no avail, they then have the ability to file a judgement against you, which results in a summons.
  • If you avoid the summons an arrest warrant may be issued.

What protects you?

Fair Debt Collection Practices Act

  • The Act covers personal, family, and household debts, including money you owe on a personal credit card account, an auto loan, a medical bill, and your mortgage.
  • The FDCPA doesn’t cover debts you incurred to run a business.

What are your rights

  • A debt collector may not contact you at inconvenient times or places, such as before 8 in the morning or after 9 at night, unless you agree to it.
  • And collectors may not contact you at work if they’re told (orally or in writing) that you’re not allowed to get calls there.
  • You have the right to sue a collector in a state or federal court within one year from the date the law was violated.
  • Every collector must send you a written “validation notice” telling you how much money you owe within five days after they first contact you.

The debt collectors rights

  • The creditor or the debt collector can sue you to collect the debt.
  • If a debt collector files a lawsuit against you to collect a debt, respond to the lawsuit, either personally or through your lawyer, by the date specified in the court papers to preserve your rights.

What to do if a debt collector sues me?

  • If a debt collector files a lawsuit against you to collect a debt, respond to the lawsuit, either personally or through your lawyer, by the date specified in the court papers to preserve your rights.

Where do I report a debt collector for violations?

Report any problems you have with a debt collector to your state Attorney General’s office (www.naag.org) and the Federal Trade Commission (www.ftc.gov).

What practices are off limit to debt collectors?

Harassment. Debt collectors may not harass, oppress, or abuse you or any third parties they contact.

False statements. Debt collectors may not lie when they are trying to collect a debt.

Unfair practices. Debt collectors may not engage in unfair practices when they try to collect a debt.

To find out more information about your rights visit http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre18.shtm

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One Comment leave one →
  1. Power Edge MG permalink
    July 17, 2010 3:32 pm

    Great information!

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