Consumer Law

Debt Collectors Find Legal Loophole That Can Lead To Imprisonment

By M. Stan Herring

The Bankruptcy Law Network has posted an interesting article about a loophole that debt collectors in Minnesota have found to throw debtors in jail...a modern day debtor's prison. Debtor's prisons were officially banned in the US in 1833, meaning the only debt that will land you in jail is if you fail to pay taxes or child support. Just being behind on bills will not lead to jail time.

But debt collectors in Minnesota seem to have found a loophole and have successfully used imprisonment (literally or just the threat of it) as a debt collection tactic. Here's how it works:
-The debt collector files a legitimate lawsuit on a delinquent debt
-If the consumer doesn't repsond the debt collector will get a default judgment
-The debt collector will file post-judgment interrogatories and requests for documents to be produced that will ask the consumer to provide detailed information about his income and any available assets.
-If the consumer still doesn't respond, the collector will request a state hearing where the consumer must appear.
-If the consumer doesn't appear, the collector can request that an order of contempt of court be issued (specifically leading to incarceration) and let the judge set bail.
-When the consumer puts together bail money, the debt collector seizes that money to collect on the debt.

This technique has been especially popular among debt buyers ? those who purchase old debt for pennies on the dollar. As reported elsewhere on this blog, there are many instances where the alleged debt is so-called ?zombie debt? in which the statute of limitations for collections ran months or years previously, or it is debt that has been bought and sold so many times that there is no proof tying this debt to the defendant who was sued.

This is just another tactic debt collectors are using to take advantage of American consumers.

If you have had problems with being harassed by debt collectors and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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Full post as published by Alabama Consumer Blog on September 10, 2010 (boomark / email).