7 Oct 2010

The Return of Debtor’s Prison

In January, a US judge sentenced him to “indefinite incarceration” until he paid $300 toward a debt he owed to a lumber yard. Originally reported in the Minneapolis Star Tribune, the case is an extreme example of a practice that, while rare, is apparently happening more frequently—the Star Tribune reports that the “use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases [in Minnesota] in 2009.”

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When a judge issues a judgment against a debtor, the debtor is supposed to complete a financial disclosure form that will provide the information a creditor needs to collect his debt. If the debtor fails to do this, the creditor can obtain a court order compelling the debtor to show up in court to explain why he hasn’t. If the debtor fails to show up for this hearing, a judge can issue a contempt of court order and a warrant for the person’s arrest.

Read the full story at Reason Magazine

Debtors' prison on  Wikipedia