Ill. House passes bill protecting debtors

Bryan Cohen Mar. 30, 2012, 3:39pm


SPRINGFIELD, Ill. (Legal Newsline) - Illinois Attorney General Lisa Madigan praised the lawmakers of the House of Representatives on Thursday for passing the Debtors' Rights Act of 2012 to protect vulnerable consumers from being taken to jail for unpaid debts.

House legislators voted 107-0-1 to approve House Bill 5434, which would stop Illinois residents from going to jail when they cannot afford to pay a debt. In the last year, Madigan learned that residents in approximately one-third of Illinois counties commonly face jail time when failing to appear in court in response to a previously entered order to pay a standing debt.

Madigan's office determined that the notices of the court hearings were mailed to addresses that were no longer valid, leaving many of the debtors unaware of the hearings. Despite the lack of notification for the debtors, courts have frequently issued bench warrants to arrest the missing debtors.

"Creditors have been manipulating the court system to extract money from the unemployed, veterans, even seniors who rely solely on their benefits to get by each month," Madigan said. "Too many people have been thrown in jail simply because they're too poor to pay their debts. We cannot allow these illegal abuses to continue."

Madigan's legislation would stop other common administrative abuses as well, including pay or appear orders that are entered routinely against debtors in some counties. The orders give debtors the option of making required monthly payments or appearing in court each month to explain their inability to pay. If a debtor misses one payment and court hearing, the debtors can end up in jail. The orders typically remain in effect for three years.

Victims of the practices usually owe payday loans, credit card debts, rent payments or outstanding medical bills, Madigan says. Many of the victims are living solely on income that is legally protected from being required to pay judgments of outstanding debt, such as veterans' benefits, unemployment insurance or Social Security, Madigan says. According to Madigan, the legislation is needed to give protection to the most vulnerable of consumers.

The legislation would amend the Code of Civil Procedure to clarify and codify practices followed by courts, creditors and attorneys throughout Illinois to make sure that courts find a consumer's ability to pay prior to entering a payment order. In addition, the legislation would prohibit payment orders relying on legally protected assets and income and would prevent bench warrants from being issued unless a consumer had been personally served with the hearing notice.

The sponsor of the bill in the Senate was Sen. William Haine.

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