debt

Family bond: Uncle pays when nephew bails

Steve BucciQuestionDear Debt Adviser,
My friend posted a bail bond for his nephew in 2003. His nephew did not show up in court. Just last year, the nephew decided to turn himself in. He is now serving time. My friend never heard anything from the bail bondsman. He never received telephone calls or mail regarding the bond forfeiture when his nephew jumped bail. It is now eight years later and he is trying to buy a house. The title company found this debt against him, which comes to $20,000 plus $9,990 in late fees. What action can he take against this?
-- Monica

AnswerDear Monica,
Your friend has a bad memory. True, he may wish he never heard about any of this, but that doesn't make it so. States have specific notification rules that would have required the court to mail notices to your friend before the hearing, as well as after the nephew didn't show.

But the bail bondsman had no responsibility to contact him. The bondsman is much like an insurance agent: He was the intermediary between the uncle, the court and the insurance company that financed the bail bond.

It typically works like this: Your friend paid only a portion -- usually 10 percent to 15 percent -- of his nephew's actual bond amount. An insurer posted a bond to cover the rest, in the event the nephew didn't show up for trial. When that happened, the insurer had to pay the claim. A judgment was issued by the court saying your friend owed the insurer its forfeited amount, plus fees and interest.

The fact that it has been eight years with no collection activity or communication is not uncommon. Many insurers are overwhelmed with the sheer multitude of bonds issued. The collection process is typically not well organized. This is a business that still uses independent bounty hunters as part of their loss-mitigation efforts, after all.

The passage of time does not, however, mean that what your friend owes is uncollectible. The reason the title company found the debt is most likely that the bond insurer received a judgment from the court when the light-footed nephew failed to appear as required.

Judgments issued by courts are public records and are often reviewed during a title search. It could be that your friend used a home he owns as collateral when he posted bond for his nephew; this is known as property bond. A judgment might have been used to place a lien on the property.

Unlike a default judgment sought by collection agencies for a typical consumer debt, where defendants can appear in court and defend themselves, a court issues a judgment for a bond default once the bond passes an allowed time limit. The judgment is issued for the full face value of the bond. Fees can be added as allowed in the bail bond agreement.

The additional bad news for your friend is that the statute of limitations for collecting a judgment is 20 years in many states. And many states allow a judgment to be renewed one or more times. For states that allow renewals, the judgment becomes essentially collectible for life. The result is that insurers, many of which are glacially slow in legal matters, have a long time to collect.

Your friend may escape collection proceedings for many years to come, but my experience tells me that his case will become active at the worst possible time for him -- such as when he is trying to buy a home or during a background check when applying for a new job.

Since the judgment was for a large sum, I suggest your friend consult a competent attorney who specializes in bail bond issues. Maybe there are any exceptions or loopholes in the law. Failing that, he'd be better off contacting his nephew and trying to set up a payment plan with the insurer to get this mess resolved for good.

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