September 12, 2007
Jail Time Is Not An Available Remedy In Collection Actions In Indiana

Do you ever get so frustrated with your attempts to collect a guaranteed commercial debt that you wish you could have your guarantor thrown in jail for a failure to pay?  While I understand the frustration, this drastic remedy typically is not available in Indiana.  The Indiana Court of Appeals’ August 8, 2007 opinion in Mitchell v. Mitchell, 2007 Ind. App. LEXIS 1805 (Mitchell.pdf)  reminds us of the applicable legal principles. 

The Court decided Mitchell in the context of a divorce proceeding, specifically a husband’s failure to comply with a dissolution decree requiring him to pay certain marital debts.  The wife sought to hold the husband in contempt for his failure to do so.  Although the opinion does not specifically apply to commercial lenders, some of the rules outlined by the Court are good to know:

1.  The Indiana Constitution, Article 1, Section 22, forbids imprisonment for debt, so contempt may not be used to enforce an order requiring one party to pay another a fixed sum of money.  Id. at 9.

2.  As to a final money judgment requiring a person to pay a fixed sum of money to another party, Indiana Trial Rule 69 contains the correct remedies for non-compliance with the judgment (selling the judgment creditor’s property, proceedings supplemental/garnishment, etc.).

So, a money judgment, such as a judgment on a guaranty, may only be enforced by execution (not the death kind; the seizing and selling of property kind).  As much as commercial lenders may at times want to have evasive guarantors sent to jail until they deal with their debts, this simply is not an option in Indiana.

As an aside, the situation in Mitchell did not involve a money judgment requiring the husband to pay a fixed sum of money to his wife.  Rather, the court order required him to pay, and hold his wife harmless from the payment of, mortgage and credit card debts.  As such, the trial court was not barred from using its contempt powers to enforce compliance with the order.  Thus there may be rare situations in which a lender can utilize the contempt powers of the court, but those powers are not available when the basic problem is a failure to pay money owed.

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Posted at 03:34 PM in Judgment Enforcement  |  Permalink