With the stroke of the governor's pen this week, Illinois debtors no longer have to fear going to jail if they don't pay their debts. The Debtors’ Rights Act of 2012, which will prevent poor people from being jailed over unpaid debts, is now law.
“It is outrageous to think in this day and age that creditors are manipulating the courts, even threatening jail time, to extract whatever they could from people who could least afford to pay -- veterans, the unemployed, seniors who rely solely on their benefits to get by each month,” said Illinois Attorney General Lisa Madigan, who drafted the measure. “This law corrects that gross oversight and puts a stop to throwing people in jail for being poor while still allowing fair debt collection when people have the means to pay their debts.”
Pay or appear orders
The new law, which Gov. Pat Quinn signed Wednesday and becomes effective immediately, was prompted by “pay or appear” orders that are routinely entered against debtors in some Illinois counties. These orders -- which usually remain in effect for three years -- require debtors to make a monthly payment or appear in court each month to explain why they are unable to pay, even if their financial circumstances have not improved.
That means, if a debtor misses just one payment and court hearing, he can end up in jail. Debtors who have been victims of this practice typically owe outstanding medical bills, credit card debts or payday loans.
According to court documents obtained by Madigan’s office, one Illinois court entered a “pay or appear” order against a mentally disabled man living on legally protected disability benefits that provided him with $690 a month. Even though the man informed the court of his circumstances, he was still ordered to either pay $100 a month or appear in court once a month for a three-year period.
One-third of Illinois counties used the practice
Illinois' debtors’ rights bill effectively bars creditors from using the court system to put debtors in jail to collect on a debt they justifiably cannot pay. The attorney general said she sought the measure after learning that residents in roughly a third of Illinois’ counties commonly face incarceration when they fail to appear in court over a previously entered judgment to pay a debt.
In many of these cases, notices of court hearings were mailed to addresses that were no longer valid, leaving many debtors unaware of the hearings. In spite of the failure to notify the debtors, courts have frequently issued warrants for their arrests.
Madigan said in many of these cases, the debtors are living on income that is legally protected from being used to pay outstanding judgment debts, including Social Security, unemployment insurance or veterans’ benefits.
“This law corrects that gross oversight and puts a stop to throwing people in jail for being poor while still allowing fair debt collection when people have the means to pay their debts,” Madigan said.