Wednesday, August 8, 2012

You may still end up in debtor's prison

On a recent trip to Williamsburg, I spent some time in the ancient "gaol," where poor folks might have ended up for failure to pay their bills. Here's an excerpt of their history:

The only offense for which long-term imprisonment was common was debt, though this presented a paradox. Wealthy debtors who had money but refused to pay might be persuaded by the prospect of imprisonment to settle their obligations.

Locking up the poor, though, guaranteed they could never earn the money they owed, and this struck many as absurd. The New York legislature said in 1732 that "many poor persons may be imprisoned a long time for very small sums of money … to the ruin of their families, great damage to the public who are in Christian charity obliged to provide for them and their families … and without any real benefit to their creditors." Yet only in the 1830s did the United States begin to abolish debtors' prisons.
I spent just a few minutes in the jail cells (partly because my wife and traveling companions closed the door and held it shut!), and it was not fun. I was alone in a cell built for 8, but which often held up to 25, with no provisions for personal comfort or privacy.

But you can still be jailed for your unpaid debts!  The "debtor's prison" may have been officially abolished, but that doesn't mean you won't end up in jail after being sued for unpaid bills. Don't appear for trial or the post-trial examination, and you can be arrested--it won't matter if you owe $500 or $5,000 dollars! And see what this Alabama judge had to say on the subject of "private prisons." 

If you've been sued, it goes without saying that you MUST seek guidance of counsel to negotiate with your creditor, counter-sue them, or help you navigate through a bankruptcy. It is not necessarily your inability to pay that will get you jailed, it is your refusal or failure to participate in the judicial process, which will grind you to a pulp if you simply ignore that judicial summons.

[Update: check out this August 19, 2012 report, from St. Louis, that describes how Missouri folk are being imprisoned for days, for debts as small as $400-500!]

And even after the conclusion of the judicial process, including bankruptcy, you can still be haunted by old debt that remains on your credit reports. I've had so many questions about errors in client credit reports which cause disruption in their lives, I am sharing the publicly available information that will allow most folks a "do-it-yourself" remedy to ghost entries.

Once a debt has been written off and a 1099C has been issued, the debt can't be collected. Errors on your credit report must be corrected by the credit reporting agencies according to the Fair Credit Reporting Act.

Collect a copy of the 1099C and any other relevant information and submit this information to the credit reporting agencies with a request to correct your credit report. Inaccurate, incomplete or unverifiable information must be removed or corrected, usually within 30 days. However, a reporting agency may continue to report information it has verified as accurate.

Visit the Federal Trade Commission for a good summary of the process on the official government website. Check it out!

Call us, if you need help.

Visit the Young & Valkenet website.