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Are Debtors’ Prisons Making a Comeback in Indiana?

Concerns are growing that small claims courts in Indiana may be taking actions that amount to the return of debtors’ prisons, sparking national debate on the issue. This has occurred despite objections from the state’s Court of Appeals as well as a state constitutional ban on imprisonment for debt.

Several small claims courts in the southern part of Indiana have been jailing, or threatening to jail, debtors who fall behind on court-ordered payments. In a recent case in Perry County, Circuit Court Judge M. Lucy Goffinet ruled in a civil case that a defendant must pay $25 per month or he would sit “at the Sheriff’s Department.”

The Indiana Court of Appeals reversed, holding that the “trial court improperly threatened [the defendant] with imprisonment for his failure to propose a plan to pay the judgment.” See: Button v. James, 909 N.E.2d 1007 (Ind.App. 2009).

In the words of Alan W. White, professor of consumer law at Valparaiso University, such actions by a small claims court are “absolutely not a routine practice anywhere else in the country.” The issue gained national attention, being featured in a report on CBSMoneywatch.

Judges from Vanderburgh Superior Court, another Indiana small claims court known for ordering imprisonment, have stated they will ask the Indiana Judicial Center to examine how courts are dealing with such cases. They defend the practice, however, arguing that it is within the court’s authority.

Not so, said Katherine Rybak, an attorney with Indiana Legal Services, who contends that incarcerating people for failing to pay a debt is unconstitutional. “No imprisonment for debt means no imprisonment for debt even when the debtor has the ability to pay,” she observed.

The distinction, the judges argued, is that debtors are not being sentenced for failure to pay, but for failing to obey an earlier court order to pay. “It may appear to you to be a fine line, but it makes a difference,” said Superior Court Magistrate Richard D’Amour. Judge Robert Tornatta, also of the Vanderburgh Superior Court, noted that in such situations, “If you listen to Ms. Rybak, there’s nothing you can do. I just don’t believe that.”

In Indiana, many small claims cases are never heard by a judge. Instead, they are worked out as part of an oral agreement between the debtor and the creditor – or the creditor’s attorney – before a court clerk, who enters the agreement as an enforceable court order. Often, agreements are made even when the debtor has no income or subsists on social security, veterans’ benefits or other exempt forms of income. If the debtor fails to make a payment, the creditor can file an “information for contempt” petition asking that the debtor be found in contempt of the court order. A subpoena is then followed by an arrest warrant for debtors who fail to appear.

PLN recently reported a similar situation in Washington state, where defendants are relegated to what amounts to debtor’s prison due to non-payment of court costs. [See: PLN, April 2010, p.8].


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