Before bankruptcy: Can I go to jail if I ignore this summons?

Posted by Robert Weed / in Before Bankruptcy, warrant in debt / 35 comments

Around 100,000 people a year get arrested because they owe unpaid bills and ignore a court paper.  Does this happen in Virginia.  Yes!

I’m a Virginia bankruptcy lawyer.  About one-third of my clients don’t come to see me until the sheriff brings court papers to their door.

Then it’s panic time!  Here are questions people ask.

“What do these papers mean?”

“Is it too late to file bankruptcy? ”

And the big question, “Can I go to jail?”

First the good news.  In case you didn’t learn this in school, debtor’s prison was abolished in America in the 1830’s. You can’t go to jail for not paying your debts.

Here’s the bad news.  You can get arrested for not appearing in court to answer questions from your creditor.

The Wall Street Journal found that over 5,000 people were arrested for that last year in just nine big counties.   (If smaller counties did the same thing, and I hope they don’t, that would calculate to 100,000 arrests each year.)  Wow!

Can that happen to you?  Yes.  Here are the steps that could get your arrested for a debt lawsuit in Virginia.

The first paper you get is a warrant in debt.  Warrant makes it sound worse than it is.  (And just ignoring court papers is never a good idea.)  The warrant in debt cannot get you arrested.  It’s the paper when a bank, credit card company, can loan or debt collector says, “hey, you owe us this money.”  People often  call the lawyer for the creditor when they get a warrant in debt and ask, “do I have to go to court.”  The answer you get is, No.  But when you don’t go to court you admit you owe the money.

Once you miss that first court date, the machinery of the law goes to work to collect money from you.  If the creditor knows where you bank, or where you work, they can file papers for a garnishment.   You get notice of the garnishment about the same time you find out your bank account is frozen or your pay is short.  There’s a court date on the garnishment and people think that’s there chance to dispute it.  It’s not.  That’s the day the bank or your payroll is supposed to turn the money in.  When you didn’t show up at the warrant in debt court date, you automatically gave the creditor the right to garnish you.

If the creditor doesn’t know where you bank or work, they can file a “summons to answer interrogatories.”  That paper tells you, come to court and answer our questions so we can garnish you.

Some people think a “summons” sounds less dangerous than a “warrant.”  So if they ignored the warrant in debt, they should be able to ignore the “summon to answer.”  Bad idea.

The summons to answer comes with an “or else.”  If you don’t appear, the judge can order you arrested.  Usually you get one more chance.  Your last chance is called a Rule to Show Cause.  The show cause tells you to come to court to explain why you shouldn’t be arrested.  (If you explain, “Sorry, I didn’t know, I’m here now”–that usually works. )

If you miss the “show cause,” the judge will issue a capias.  Capias is an order to the sheriff to pick you up and bring you in.

That’s where you can end up if you ignore court papers.  So if you get a warrant in debt for a bill you owe and can’t pay, why start down that road at all?

Bankruptcy is a new start in life and a clear field for future effort. That’s usually a lot better than a free ride to the court house courtesy of the sheriff.

Leslie beats a warrant in debt

Posted by Robert Weed / in Before Bankruptcy, warrant in debt / 48 comments

How Leslie Beat a Warrant In Debt

Leslie, not her real name, came to see me two months ago about filing for bankruptcy.

It was clear, after we looked at her forms and talked it over, bankruptcy would work for her.  It would take a couple months, though, to gather up everything we needed for her bankruptcy to go right through.

But, she had a warrant in debt scheduled for the following week.   If she just ignored it, she was likely to get garnished.   (We didn’t want that.)  So, I told her to go to court, and follow the instructions at my warrant in debt blog.

Leslie went to the courthouse (in the picture) on the “return date” and asked the judge for a trial.  In Virginia, the trial is usually set six or eight weeks later–depending on the county and the judge.

 

She knew to ask for a bill of particulars, and the creditor asked for her grounds of defense.  The bill of particulars under Virginia law is how the creditor plans show the amount of the debt and why there is a debt.

Leslie was in luck–because her creditor was Asset Acceptance, a debt buyer.  Debt buyers often cannot prove what the debt is about or what the amount of the debt really is.   Asset Acceptance proof must have been really weak in Leslie’s case, because they filed nothing at all as their bill of particulars.

So, for her grounds of defense, Leslie wrote to the court and to Asset Acceptance, that they never filed their bill of particulars.  Also, for good measure, she also listed statute of limitations in her grounds of defense.

(The statute of limitations sets a deadline to sue you after you’ve stopped paying debt.  Wait too long, and the creditor is out of luck.)

We expected that would mean Leslie would win at the trial, but she won sooner.

Asset Acceptance wrote to the judge and said they were dropping the warrant in debt case.  Under Virginia law, that’s called a non suit.

Is Leslie home free?  Not quite.  In Virginia law–not like most states–after a non suit, the creditor could come back and try again.  But, we’ll have the bankruptcy filed before that.   (This debt with Asset Acceptance was only a small part of her problem.)

Because of her good work, she now has plenty of time to get ready to file for bankruptcy, without having to worry about getting garnished.

Before bankruptcy: beating a warrant in debt

Posted by Robert Weed / in Before Bankruptcy, warrant in debt / 66 comments

Bill, not his real name, is filing bankruptcy with me in October.  (He needs a couple more months to finish everything to get his bankruptcy approved.)

In the meantime, he received a warrant in debt.  Midland Credit Management, a big debt buyer, was suing him on a old Chase card.  He didn’t want to get a judgment and a garnishment while we were waiting for the right time to file the bankruptcy.

Bill knew, from my warrant in debt website, that he had to go to court on his return date, and tell the judge he wanted a trial.  He had an easy basis for saying he wanted a trial.  “I never heard of Midland Credit Management.  I don’t know who they are or what this is about.”

He asked for a bill of particulars, and Midland’s lawyer asked for grounds of defense.

When Midland submitted their bill of particulars, they wrote they had bought the debt from Chase, and Bill owed Chase $4822.

For Bill’s grounds of defense, he wrote to the court and Midland’s lawyer that there were no documents showing that Midland really bought the debt from Chase; and that Midland had no evidence of how much he owed Chase–they would need a witness from Chase to prove that.

Bill was nervous on his warrant in debt trial date, but it was easy.  When they called his name, the lawyer for Midland said, “Your Honor, this is our first dismissal of the day.”  The Judge then turned to Bill and scolded him slightly to be financially responsible.  Then he  said, you won today,  you are free to go.

Bill handled this on his own, but I had given him some tips.  One thing I said, if this is still America, you’ll win.  Nice to know this still is America.

Under Virginia law, Midland would be able to bring the same warrant in debt a second time.  But they won’t be able to move fast enough to beat our October bankruptcy filing.  (And they probably couldn’t prove it then, either.)

When we get to October, his bankruptcy will go fine.

PS  Here’s an update on March 30, 2011.  The Attorney General of Minnesota announced he is going after Midland, and their parent company, Encore.  He says they used robo-signed affidavits to sue people on in Minnesota.  In other words, Midland claimed they reviewed their records and had proof so-and-so owed them money–but nobody actually looked to see whether they really had that proof.  This press release would be something to bring to the attention of the Judge, if you go to court and fight Midland on one of these.

PPS.  Washington Post had a good article on beating Midland in May 2014.

In Northern Virginia, Encore’s Midland unit has filed 16,878 lawsuits from 2003 to March of this year in the district courts of five counties. The company won nearly two-thirds of those cases through judgments against consumers who either failed to appear in court or simply agreed to pay the amount.

Almost 20 percent of those people wound up having their wages garnished, according to a review conducted by The Washington Post. Debts range from as little as $53 to as much as $23,786.

The Post article includes a comment from a guy who calls himself “rogerramjetz.”  He says he used to work as a collection lawyer on exactly those cases.

A guy gets a credit card with an Account Agreement that charges him $137 to open the account the first time he uses the card, and the card has a $250 credit limit. He then buys a $35 iron and a $45 coat at Walmart with the card. He now owes $217 the next month, and when he doesn’t pay the bill, he accrues an interest charge of $5 at 29% interest. When he doesn’t pay the next month, the card accrues a late charge of $35, $5 in interest, and an overdraft fee of $35 a month, totaling $297. The following month, interest is $6, and the late fee is $35 and the overdraft fee is again $35. A year and a half after the initial $80 purchase, the account shows a $1600 balance to Providian Bank. Totally legal.

Providian then sells the debt to Midland for $0.17 on the dollar, or around $200, and gives the last statement the guy received for $1600 as evidence of the debt. Glasser & Glasser in Norfolk is promptly retained to sue the guy for $1600, with interest at 29%, and accrued interest since the default a year before totaling $500, while the Account Agreement is invoked for a “33.3% reasonable attorney’s fee, totaling $533” and court costs of $63.00. An affidavit from Midland and Providian is generated, and a sheriff delivers the Warrant in Debt to the guy.

Total sued for? $2,693, but we will gladly settle for a lump sum of eighty cents on the dollar, or $2,154. For an iron and a coat at Walmart. Or we will take a judgment and garnish 25% of your wages until paid, and in three years the balance will double again at 29% interest.

How do I know this? I worked for Glasser as local counsel.

“Roger’s” example may be extreme but it shows how small debts can lead to fairly big garnishments, with late fees, over limit fees, later over limit fees, legal fees and the rest are added in–the just 29% interest alone doing it’s magic.

What’s the lesson:  Many credit cards in bankruptcy have already been money makers for the credit card companies.   And if you are getting sued by people you never heard of, it’s time to talk to a lawyer.