One of the most common worries among delinquent debtors is whether or not it is possible for them to end up in jail as a result of their outstanding liabilities.
Here in California, the short answer is that this is one possible outcome, but upon further review, you will discover that it only happens in extremely rare cases.
In order to help you understand the series of event that must happen for a debtor to end up in jail, we first have to understand the court proceedings that lead up to that happening.
Filing for a Judgment
The first legal proceeding to take place in any case that involves a failed debt collection is for the creditor or debt collector to obtain a judgment against the debtor.
For this to happen, the collector must prove in court that the debt is legitimate and that the debtor has failed to meet their obligations according to the agreement.
Filing for a judgment is almost always the last option for any debt collection agency. Spending time in court pursuing a debtor often ends up costing the creditor more time and money than they ever recover, so in many cases, the effort just isn’t worth the potential return.
If a collector is able to obtain a judgment against a debtor, they then have the right to collect on that judgment in a number of different ways. One of the most common ways that things proceed from here is for the collector to enforce the judgment by garnishing the debtor’s wages.
But another avenue that a collector with a judgment can pursue is to force the debtor to show up for a Debtor’s Examination. This is a formal court proceeding where a debtor must document all of their assets, liabilities, and income to the court under oath.
Following this documentation, the creditor has the power to force the debtor to sell personal property or real estate in order to settle the judgment that is owed to them.
Failure to Appear
If a debtor fails to appear at a Debtor’s Examination, that is when things can get interesting. Failure to appear places the debtor in contempt of court. And while failing to pay your debts is not something people go to jail for here in California, contempt of court certainly is.
In many cases, debtors will attempt to delay a Debtor’s Examination in order to file bankruptcy. This will give them time to work out their financial issues before a creditor can force them to sell their property, but in almost all cases, we are talking about too little too late on the part of the debtor.
So while you won’t find anyone in “Debtor’s Prison” here in California, it is possible that the proceedings involving the debtor and the debtor’s response to those circumstances could result in some jail time.
And while this is a roundabout way of ending up in jail, it is important to remember that there is nothing comfortable about being in jail, so debtors should definitely make an effort to show up anytime they are asked to appear in court.