Wednesday, March 13, 2013

Twenty-First Century Debtors’ Prison: The Minnesota Model. Minnesota County Jails have become Dickensian Debtors’ Prisons. Zimmerman vs. Dave Bellows (the Dakota County Sheriff). District of Minnesota Case No. 12-CV-2811.

A Debtor filed bankruptcy, then spent 5 days on 23 hour-a-day lockdown in the Dakota County Jail on a Minnesota “Debt Warrant” – He was never brought before a judge.

Most people are not aware that you can end up in jail for owing a debt.  If you owe a creditor money and the creditor sues you in Minnesota State Court, they can obtain a “money judgment” against you.  This is essentially a court order that one person or entity owes another person or entity money.  Once a judgment is obtained, there are several things that a creditor can do to collect the debt.  A creditor can attempt to levy on a bank account or garnish your wages. 

Another thing a Creditor can do is mail you a piece of paper called a “Demand for Disclosure” (if they have an attorney, if a creditor is not represented by an attorney, they need to obtain an “Order for Disclosure” from the Court Administrator).  Either of these is considered to be an order of the Court to disclose your assets to the creditor.  If you do not respond to the Demand or Order within ten days, the creditor can apply to the Court for an “Order to Show Cause.”   An Order to Show Cause is signed by a judge, and it has a time and place that the Debtor to whom it is directed needs to appear in Court and “Show Cause” to the Court why they should not be held in contempt of court for failing to respond to the Order to Disclose assets.  This Order to Show Cause must be personally served on the Debtor and the original signature of the Judge needs to be shown to the Debtor at the time the Order to Show Cause is served.  If the debtor shows up at the hearing set on the Order to Show Cause, the Judge will order the debtor to fill out the financial disclosure form that was mailed to them.  If the debtor does not fill out this form, the Judge can and probably will have the debtor held in jail for contempt until such time as their  - contempt is “purged” – either by payment of the debt or by filling out the financial disclosure form.  If a debtor does not show up for the hearing set on the Order to Show Cause, the Judge will issue a warrant for the arrest of the debtor.  When the debtor encounters law enforcement, they will be arrested and brought to jail.  Once the debtor is in jail, the debtor needs to be given an opportunity to purge their contempt either by filling out the disclosure form or by paying the debt.

All of these procedures described above are creatures of Minnesota State Law and Minnesota State Court.  Bankruptcy is Federal Law and is handled in Federal Courts.  Article VI, Clause 2 of the United States Constitution, the “Supremacy Clause” states as follows:

“This Constitution, and the Laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the constitution or laws of any state to the contrary notwithstanding.”

Julius Chad Zimmerman filed for Chapter 7 Bankruptcy in the District of Minnesota on October 27, 2011.  At that time, he had a “debt warrant” out for him in Dakota County.  The creditor who had obtained the warrant was notified of the bankruptcy filing.  When Mr. Zimmerman filed for bankruptcy, he immediately obtained the protection of the bankruptcy “automatic stay” set forth in 11 USC § 362, which states in relevant part as follows:

“(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of—
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title”

(Italicization added)

In other words, the automatic stay is an order of the Federal Court for any entity to cease any efforts to collect money from the debtor.  It is like a shield that instantly envelopes the Debtor that protects him from any collection efforts.

On November 10, 2011, police in the town where Mr. Zimmerman lived came to his home while he was babysitting his girlfriend’s children and arrested him on the debt warrant and booked him in the Dakota County Jail.  Mr. Zimmerman was not released from the Dakota County Jail until November 15, 2011.  In the Dakota County Jail, Mr. Zimmerman was placed on 23 hour-a-day lockdown.  He was not brought before a Judge and it was days before he could get a hold of his attorney (Nathan Hansen, me).  The creditor had failed to get the debt-warrant against Mr. Zimmerman quashed (the term of art in Minnesota for getting rid of a warrant).  Mr. Zimmerman’s attorney contacted the creditor’s attorney, who contacted the jail to try and get Mr. Zimmerman released.  It still took several days to get Mr. Zimmerman released.

Mr. Zimmerman did not have any pending criminal charges against him and was not subject to any sort of criminal proceeding or process.  He was only in jail on a debt-warrant.  When he was arrested and brought to the Dakota County Jail, Mr. Zimmerman repeatedly told his captors that he had filed Chapter 7 bankruptcy on October 27, 2011 and that the Federal Court’s automatic stay was in place.  His captors ignored his pleas completely.  Mr. Zimmerman’s captors at the Dakota County Jail not only explicitly ignored his assertion about the automatic stay, they also never brought him before a Judge to give him an opportunity to purge his contempt – or better yet, explain that he had filed bankruptcy and under the protection of the Federal Court’s automatic stay.

Creditors can be held liable to debtors for failing to get debt-warrants quashed – and Mr. Zimmerman has settled with the creditor in his case.  However, important questions and claims still remain.  Mr. Zimmerman has filed suit in Federal District Court in Minnesota against the Dakota County Sheriff.  In addition to his claims for damages from being held in jail illegally, Mr. Zimmerman seeks prospective injunctive relief (asking the Court for an Order to tell the Sheriff to specifically do something, not just pay money) as follows:

“An Order for prospective injunctive relief against the Defendants:
a.      Requiring Defendants to develop appropriate policies and procedures to ensure that civil judgment debtors are timely brought before a Judge so that they may be heard.
b.      Requiring Defendants to develop appropriate policies and procedures to ensure that debtors arrested on civil judgment warrants are not held indefinitely on 23 hour-a-day lockdown in their facility and otherwise not treated cruelly and treated appropriately as debtors and not as persons accused of or convicted of crimes.
c.      Requiring Defendants to develop appropriate policies and procedures to verify if judgment debtors held on civil debt warrants have invoked the automatic stay pursuant to 11 U.S.C. § 362 et seq if the debtors assert verbally or in writing that they have invoked the automatic stay.”

The Dakota County Sheriff has answered the Plaintiff’s Complaint, asserting among other things, that the Federal Court's automatic stay does not apply to him and that he is immune from suit.  At this point, the Dakota County Sheriff has not done anything to fix the broken procedures at his jail.  As the economy worsens and more people are in debt, debt-warrants and incarceration for debt are likely to increase in Minnesota.  Minnesota Sheriff’s Offices need appropriate procedures in place to protect Debtors’ rights under state and federal law.  I will update this blog when anything significant develops in this case.  If any members of the media are interested in this story and these issues, I would be happy to speak with them.  If you are subject to a debt-warrant or are otherwise considering filing bankruptcy, I can be contacted at my office at 651-704-9600.