Bankruptcy Lawyer Bryan W. Stone answers the question: “Should I file bankruptcy?”
You might be surprised to learn that some countries still have debtors’ prisons. In fact, the United Arab Emirates just announced that its cabinet has approved the final part of a plan to create a bankruptcy law for the country which will help abolish the threat of jail time related to unpaid debts.
The country’s lack of a bankruptcy law has long been a problem. Back in 2008, during the financial crisis, thousands of citizens fled the country after their businesses went under. These people packed up and left, leaving behind their possessions, to avoid the threat of jail due to their inability to repay debts. The new law is meant to mimic Chapter 11 in the U.S. and allow people to escape debt they can no longer afford without the threat of incarceration.
In the U.S., debtors’ prisons were officially banned by federal law in 1833. Some 150 years later, the Supreme Court affirmed the federal legislation, issuing a decision explaining clearly that incarcerating someone due to their inability to pay debts was unconstitutional under the 14th Amendment’s Equal Protection clause.
It’s important to note that in the U.S., and soon in the UAE, de jure debtors’ prisons are a thing of the past. That being said, de facto debtors’ prisons are, sadly, alive and well. What kinds of debt are people in the U.S. thrown in jail for? It boils down to two broad categories: privately acquired debt and debt related to the criminal justice system.
Debt related to the criminal justice system usually refers to fines and other penalties related to a criminal infraction, such as traffic tickets. In these cases, poor defendants are given fines as part of a criminal conviction and, when they can’t pay, are given the choice of “paying or staying”, meaning pay up the full amount owed or being left to sit in jail. A good example comes from Colorado, where an investigation revealed that some 800 individuals spent time in jail related to their inability to pay minor fines. Most of these people were homeless and had been fined for things like panhandling or sleeping in a park.
Though this “pay-or-stay” practice is troubling enough, there are instances where a person can be jailed related to privately acquired debt. An example would be if a lender or debt collector takes a debtor to court in an attempt to collect money. Though this is a civil action, if the debtor was to fail to show up and the judge decides to issue a warrant for the person’s arrest (usually because the person has willfully not paid the money owed), then the person could be arrested and jailed. The jailing would occur technically due to a contempt of court charge, not due to the debt, but the effect is the same. The debtor could be held in jail until he or she posts bond or pays the debt.
Thankfully, the ACLU and other organizations are taking action to stop the incarceration of individuals due solely to their inability to pay. One example of this occurred in Benton County, WA, where an ACLU investigation revealed that 28 percent of the county’s jail population was made up of people serving time related to fines. The ACLU sued and the county was forced to abolish its modern day debtors’ prison and sign an agreement promising never to punish the poor in such a way.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
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