Debt evasion
Encyclopedia
Debt evasion is the intentional act of trying to avoid attempts by creditors to collect or pursue one's debt. At an elementary level, this includes the refusal to answer one's phone
by screening one's calls
or by ignoring mailed notices informing the debtor
of the debt. In more advanced cases, this includes misleading the creditor to believe the debtor does not reside at the location where the creditor is attempting to reach the debtor.
Debt evasion is common because many people are scared of creditors when they owe many and feel uncomfortable confronting those attempting to collect debt. But evasion does not make the debt disappear, and does not make the debtor any less liable toward the creditor.
In most cases, debt evasion is not a criminal act. The majority of democracies
prohibit imprisonment of people who are in debt
as a method of forcing their repayment. The only democracy that still allows imprisonment of those in debt is Israel
, and the country has been taking steps to eliminate this practice.
Contrary to what most debtors believe, debt evasion is not always advantageous to the debtor. The creditor, if not challenged, is able to take all legally allowable civil action against the debtor. A debtor's willingness to communicate with the creditor may help reduce some of this action.
On the other hand, any information given to creditor or its collection agency
can be used against the debtor as an admission
.
that limits the time between the last activity on the debt and the commencement of a civil suit. Once the limitation period expires, debtors can use this fact to stop the calls from an agency by demanding a civil suit be initiated, at which point they may successfully defend based on the expiration of the limitation period.
avoidance is a form of debt evasion. Specifically evading tax means legally using tax regime laws to one's own advantage to reduce taxes. By contrast tax evasion means not paying taxes by illegal means.
Missed call
A missed call is a telephone call that is not answered by its intended recipient prior to the termination of ringing on the recipient's end. The ringing may be terminated by the caller simply by hanging up the receiver of a landline phone, or pressing the appropriate button on a mobile phone, or if...
by screening one's calls
Call screening
Call screening is the process of evaluating the characteristics of a telephone call before deciding how or whether to answer it.Some methods may include:* listening to the message being recorded on an answering machine or voice mail...
or by ignoring mailed notices informing the debtor
Debtor
A debtor is an entity that owes a debt to someone else. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor...
of the debt. In more advanced cases, this includes misleading the creditor to believe the debtor does not reside at the location where the creditor is attempting to reach the debtor.
Debt evasion is common because many people are scared of creditors when they owe many and feel uncomfortable confronting those attempting to collect debt. But evasion does not make the debt disappear, and does not make the debtor any less liable toward the creditor.
In most cases, debt evasion is not a criminal act. The majority of democracies
Democracy
Democracy is generally defined as a form of government in which all adult citizens have an equal say in the decisions that affect their lives. Ideally, this includes equal participation in the proposal, development and passage of legislation into law...
prohibit imprisonment of people who are in debt
Debtor's prison
A debtors' prison is a prison for those who are unable to pay a debt.Prior to the mid 19th century debtors' prisons were a common way to deal with unpaid debt.-Debt bondage in ancient Greece and Rome:...
as a method of forcing their repayment. The only democracy that still allows imprisonment of those in debt is Israel
Israel
The State of Israel is a parliamentary republic located in the Middle East, along the eastern shore of the Mediterranean Sea...
, and the country has been taking steps to eliminate this practice.
The process
In the process of debt collection, agents are doing a job they are assigned to collect debts. They are usually employed by large companies, so the likelihood the same agent will talk to the same debtor within a short enough period of time is low.Contrary to what most debtors believe, debt evasion is not always advantageous to the debtor. The creditor, if not challenged, is able to take all legally allowable civil action against the debtor. A debtor's willingness to communicate with the creditor may help reduce some of this action.
On the other hand, any information given to creditor or its collection agency
Collection agency
A collection agency is a business that pursues payments of debts owed by individuals or businesses. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed....
can be used against the debtor as an admission
Admission (law)
An admission in the law of evidence is a prior statement by an adverse party which can be admitted into evidence over a hearsay objection. In general, admissions are admissible in criminal and civil cases.At common law, admissions were admissible...
.
Denying existence
Some debtors pretend to be deceased to avoid paying. For example, if called, the debtor may say s/he is another person and claim the debtor does not live there or has died.Court summons avoidance
Some debt is collected by court order. The debtor is summoned to court and must be served by a summons, usually at the hands of a sheriff. Many attempt to avoid contact with the sheriff and pretend they never received the summons. But the failure to come to court can only hurt the debtor. If the creditor shows to court and the debtor doesn't, the debtor is automatically awarded the case and may start collecting.Statute of limitations
Some jurisdictions have a statute of limitationsStatute of limitations
A statute of limitations is an enactment in a common law legal system that sets the maximum time after an event that legal proceedings based on that event may be initiated...
that limits the time between the last activity on the debt and the commencement of a civil suit. Once the limitation period expires, debtors can use this fact to stop the calls from an agency by demanding a civil suit be initiated, at which point they may successfully defend based on the expiration of the limitation period.
Foreign bank accounts
Some may be able to protect their assets by transferring them into a bank account in a foreign country, where the money is considered to be untouchable according to the laws of the country where the judgment was made. However, in the United States, more recent court rulings have made this more difficult.Evading Tax
TaxTax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
avoidance is a form of debt evasion. Specifically evading tax means legally using tax regime laws to one's own advantage to reduce taxes. By contrast tax evasion means not paying taxes by illegal means.
See also
- BankruptcyBankruptcyBankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
- LiquidationLiquidationIn law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
s - Administrations
- Administrative Receiverships