How Credit Collectors Have Reinvented the Debtors' Prison
Action has two goals: discovery and collection. The court orders the debtor to disclose information about his property, location of his assets, etc. to help creditors track down those assets. Then the court orders certain payments to be made, which allows for collection. This court order is enforced through the court’s authority to hold debtors in contempt, which in turn is enforced through threats of imprisonment. Depending on the jurisdiction, contempt charges can be made against either the failure to show up for the discovery process or the failure to stick to the collection ordered.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.”
Debtors who run into the law often don’t understand the process; since the debt has often been resold multiple times, they may not even recognize the names of the plaintiffs. It is also problematic that debtors who don’t show up for the summons are likely to be confused as to what they are being jailed for. They may think they are being jailed for nonpayment when they are actually being jailed for the failure to show up and not telling the court and creditors about their assets. It is in the interest of creditors to blur this distinction. Though debtors can often get out of jail by compliance, they may feel they need to pay off debts immediately to get out of jail instead. Debtors will be willing to make costly financial decisions, including using money that is legally protected from debt collectors, to get out of jail immediately. Indeed, many debtors are cash constrained and can’t deal with even temporary incarceration due to the costs of work and family disruptions and will be willing to do anything to get out of jail.
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This exacerbates the first problem — as Shepard notes, “It may be easier to sue a debtor than to determine if she is a viable litigation target, and even judgement-proof debtors can tap 'last resort' payment sources, like exempt property, loans from
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