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Can You Face Arrest For Not Paying a Debt?

handcuffsEven with debtor’s prisons gone for nearly two centuries, debtors still have a fear of being arrested for the money owed to private creditors. While generally this is not authorized, creditors found ways to use law enforcement to collect on civil judgments. This created a climate of fear surrounding unscrupulous debt practices and many clients ask if they can go to jail for facing hardship. Here is an overview of these developments and how it affects debt collection in New York.

Source of the Rumor

Last year, a Texas man was arrested over a student loan debt that was decades old. The creditor claimed that they demanded his appearance in court when he failed to show, they asked the judge to issue an arrest warrant. After arrest, he was required to make a payment plan with his creditor. Despite these claims, the defendant never received service for the lawsuit or any notices of a hearing.

Texas is not the only place this occurred. The Great Lakes region, especially Minnesota and Illinois, faced a 60 percent increase in arrest warrants connected to civil judgments. Debts owed ranged from $85 to $3,500. Many of these were below the costs involved to feed and house an inmate for a night.

It is estimated that one-third of state statutes may contain loopholes that encourage this practice. Large collection agencies that buy debt and make aggressive collection efforts to profit from these transfers are the main beneficiaries of this punitive approach to securing payments.

Meanwhile, people face disrupted lives. Jail stays are not long; usually no more than 25 hours. But during this time, people miss work days, cannot attend to household matters, and often face stress and trauma. It is no wonder that those in financial hardship worry that the next development to their troubles is police officers knocking on their doors with ready handcuffs.

New York Law

Fortunately, these developments do not happen in New York currently. Consumer protection laws place requirements on debt collectors, including the large “debt buyers” that are guilty of these arrest practices.

All agencies must be licensed and include certain information on their debt collection calls including company name, the original creditor, amount of debt, and call-back numbers. If a consumer requests that the debit is validated, the collection agency must send documentation showing the name of the original creditor, the amount, and how to dispute the debt. This makes it difficult for creditors to avoid notice requirements that would normally alert consumers to required court hearings and other procedures.

Also, during telephone communications, agents cannot threaten arrest or legal action. When this occurs, consumers have a cause of action under state and federal law.

There are Options

It is unlikely that you will face arrest for being behind on debt payments in New York. However, that does not mean creditors may not eventually find a way to use enforcement procedures becoming common in Texas, Minnesota, and Illinois.

If you face this possibility you have two options:

  • Civil claims. When creditors behave in a threatening manner, you have remedies under the federal Fair Debt Collection Practices Act and New York City Consumer Protection Law, Local Law 15. You can pursue money damages and even have your debt balanced waived.
  • Chapter 7 Bankruptcy. If you are facing multiple debts that leave you in fear of your financial future, Chapter 7 bankruptcy may be your best option. The process allows you to discharge debt and make a fresh start. Since bankruptcy invalidates any judgments that might produce an arrest warrant, you can live in peace once the process is complete.

Gertler Law Group, LLC offers an extensive practice helping people in Long Island, NY address their financial issues. Whether you require guidance through a bankruptcy or face aggressive collection activity, contact us today to schedule a consultation.

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