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Credit card debt may land you behind bars
By Oscar Monfort on Jul 14th, 2010
The idea of a debtors' prison may seem like an archaic notion on the pages of a novel from Charles Dickens. But in some ways, the concept still exists across the country.
According to a recent report from the Minneapolis Star Tribune, people across the U.S. are being arrested for charges tied to their credit card debt. While owing money isn't illegal itself, failing to appear in court on an order regarding that debt could land a person in jail.
In other words, not paying debt could force a person to spend a night in the county lockup.
"Consumer attorneys say such arrests are increasing in many states, including Arkansas, Arizona and Washington, driven by a bad economy, high consumer debt and a growing industry that buys bad debts and employs every means available to collect," the Star Tribune said.
At issue are debt collection firms, which often buy outstanding balances from cell phone companies and credit card issuers. While they pay a small sum to take on the debt, the potential return may be much larger, provided they get a person to pay what they owe.
After multiple calls or letters to a debtor, these companies may rely on a lawsuit to get consumers to appear in court. However, the Star Tribune noted that many people may not recognize the names of these companies, and therefore ignore the notices they may receive.
That's where law enforcement and court action comes in. By not appearing before a judge, debtors may be held in contempt of court and a warrant is issued for their arrest.
Take, for example, the experience of Joy Uhlmeyer, who was featured in the piece from the newspaper. The 57-year-old was arrested by deputies from Minnesota's Anoka County and spent 16 hours overnight in a holding cell before being told what she had been arrested for - the $6,200 she owed on a Chase credit card.
"The really maddening part of the whole experience was the complete lack of information," she told the Star Tribune. "I kept thinking, 'If there was a warrant out for my arrest, then why in the world wasn't I told about it?'"
Whether or not deputies come calling for an outstanding debt may depend on local law enforcement's ability to devote manpower to these cases. On average, the paper found that 1 in 6 Minnesotans in debt risked landing in jail.
This comes as millions of Americans have tried to reduce what they owe in the wake of the worst recession since World War II. The Federal Reserve Board reports that revolving consumer credit declined by 9.6 percent, much of it accounted for by debt on plastic.
However, while some of this may be people trying to pay off debt, a recent report from the Wall Street Journal showed that almost 96 percent of the decline in debt last year was accounted for by charge offs - money owed by consumers that companies no longer feel they will be able to collect. That amounts to about $18.7 billion.
And, if all that debt is sold to a third-party company, it may present quite the enticement for debt collectors to make every effort to try and get back what is owed.
While it may be too late for some people, there are options some consumers can take to avoid falling on the wrong side of the law. Along with cutting down unnecessary expenses, there are a number of consumer credit counseling agencies that may provide assistance.
That could include setting up a budget or a debt management plan, which may help take care of bills before they land a person in jail.
More General Debt News
- 12-13-2010
- Credit card charge offs fell in October
- 10-08-2010
- Bankruptcy filings back on the upswing
