NPR just ran a story called “Unpaid Bills Land Some Debtors Behind Bars.” As they report, ”Here’s how it happens: A company will often sell off its debt to a collection agency, generally called a creditor. That creditor files a lawsuit against the debtor requiring a court appearance. A notice to appear in court is supposed to be given to the debtor. If they fail to show up, a warrant is issued for their arrest.” Marie Diamond has more.
This is increasingly common across the country. My colleagues Matt Stoller and Bryce Covert have both written about debtors being jailed for failure to appear in court. Debtors’ prisons are illegal, and some point out that this is really jail for a summons problem, not a payment. But I haven’t had a full vision of the practice until I read this excellent working paper by Lea Shepherd of Loyola Chicago law school, “Creditors Contempt” (h/t creditslips). Beyond laying out the problems with the current system, which gives a disproportionate amount of the coercive powers of the state to creditors, this paper also has implications for another topic I’m interested in — the class bias of the submerged state.
So how does this go wrong? The most obvious way is that this in personam debt collection method — which should be reserved for “extraordinary” situations — is used regularly by today’s collectors. Given that a debtor’s liberty is at stake, it seems very important that there are strict rules for this practice and that these actions are used only when appropriate. But as Shepard finds, “in personam remedies are often initiated and executed on a high-volume basis and with a striking degree of informality.”
Informality as in, not requiring actual mortgage documents to foreclose? Ah well, time to adapt to the New Informality!