Debt management can keep you out of jail!

Debtor’s prison was outlawed in this country in the first part of the 19th century, but creditors and collection agents have found a way to send debtors to jail anyway!  A recent report by the Wall Street Journal revealed that a third of US states allow debtors to be arrested, and in just nine counties they checked (13.6 million people), an amazing 5,000 arrest warrants have been issued for debtors since January 2010.

The Journal reports that these warrants “…generally can be issued if a borrower defies a court order to repay a debt or doesn’t show up in court.”

I have long advised anyone who gets a summons to show up in court — or at least to respond to the summons, but if you live in one of those states that allows an arrest warrant to be issued, that advice is very important.  Even better advice is not to let things get to that point.

If you have the ability to do so, you should try to pay your debts.  You can usually make a deal to pay a debt over time.  If you have multiple debts piled up, you can go to the National Foundation for Credit Counseling (NFCC) and select a local Consumer Credit Counseling Service to arrange a debt management plan.  (I am not recommending any of the services you see advertised on TV these days. I do not know enough about any one of them, and I do know that some of them are scams.)

The NFCC agencies can usually stop all interest and late payments and come up with a monthly payment plan you can afford to pay over time.  If they cannot do that in your circumstances, they will recommend bankruptcy, which I think is an underused and perfectly legitimate method of dealing with overwhelming debt (the US Constitution tells the federal government to set up a bankruptcy system.)

But whatever you do. do not ignore your debt problems, or one day the sheriff may show up at your door with an arrest warrant and take you out in handcuffs.  Even small ignored debts can be a problem in some states.  One person interviewed by the Journal spent five days in jail until he paid off a lousy $265 debt!

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