No debtor’s prisons

Today, an opinion of the Indiana Court of Appeals addresses a distinction that is often misunderstood but which is very important in the collection business. When a debt is referred to my office for collection, the typical path goes something like this: Demand letter > No response > Suit > No response or appearance at court > Default Judgment > Notice of judgment to debtor > No response from debtor > Proceeding Supplemental > Debtor’s Failure to Appear > Rule to Show Cause > Debtor’s Failure to Appear > Body Attachment. (Bold text represents action or inaction on the part of the debtor; plain text represents actions by my office or by the court.)

Some of the terminology there probably needs explanation: “Proceeding Supplemental” is a proceeding at which the debtor can be asked under oath about his or her income and assets available to satisfy some or all of the debt. Frequently the information at the hearing can lead to wage garnishment, attachment of funds in a bank account, or the like. Even more frequently it leads to an agreement by the debtor to make payments toward the judgment at a fixed amount per week or per month. “Rule to Show Cause” is an order by the court for the debtor to “show cause” why he or she should not be held in contempt for failing to appear at the Proceeding Supplemental. As a practical matter, this usually just amounts to a second chance hearing. If the person shows up, the court will usually just want the Proceeding Supplemental to be conducted and won’t spend much time asking the debtor why he or she missed the previous hearing or deliberating on whether to hold the person in contempt. “Body attachment” is an order by the court to the Sheriff to pick up the individual who failed to obey the court’s order to appear at a hearing.

In the case linked above, Sandage v. Keaton, the judgment debtor appeared at a Proceeding Supplemental and agreed to pay $20 per week toward her debt. This agreement was reflected in a court order following the hearing. When she missed a payment, the judgment creditor reported the fact to the court which in turn issued a body attachment against the judgment debtor for failing to abide by the court’s order to pay. The Court of Appeals recognized that this was improper. You don’t lock a person up for not paying. The Indiana Constitution prohibits imprisonment for debt. An exception is made in cases of fraud or child support cases. In this case, potentially the court could have considered contempt proceedings under the theory that the debtor failed to make agreed upon payments as incorporated into a court order — though I’m skeptical of this. But, at the very least, the court would have had to conduct a hearing first since such contempt (failure to pay) would constitute indirect contempt. Indirect contempt requires a certain amount of process not required in cases of direct contempt (e.g. being disruptive in the court room).

Fairly often, when I ask the court for a body attachment and the person is picked up on the writ, the person will complain to me about debtor’s prisons – or some variation on that theme. I am always careful to explain to them that they were not being locked up for owing a debt. They were locked up for failing to appear at a court hearing when ordered to do so by a court.

I guess that’s my way of advising any readers out there to show up for court dates when ordered to do so. I’m not even going to charge for that bit of advice.