Study Examines Economic Consequences for Pretrial-Detainee Households

Many of those who get arrested cannot afford bail in the United States (where – along with the Philippines – commercial bail bond companies dominate the pretrial release system). On a given day, about 480,000 people are detained on pending charges—many in local jails.

Pretrial detention primarily is to ensure a defendant will not flee before trial or pose a danger to others. But unintended consequences from the system's direct and indirect associated costs make it difficult for detainees and members of their households to meet their financial obligations – as outlined in research accepted for publication by the Review of Financial Studies and co-authored by Assistant Professor of Finance Pablo Slutzky at the University of Maryland’s Robert H. Smith School of Business.

In many cases, the implications are financially catastrophic—or traumatizing, as a New York Times article depicts: A Santa Clara father puts up his house as collateral on his daughter’s bail bond and faces foreclosure as a result; a Des Moines woman has her car repossessed after putting it up as collateral for her child’s father’s bail bond; and a New Orleans mother facing threats from men with guns and bulletproof vests who demanded she pays her son’s bail bond fees.

Beyond these anecdotes, Slutzky and co-author Sheng-Jun Xu at the University of Alberta focused on Maryland's court system from 2000-2016. They matched more than a million individual-level criminal case records to household-level financial data covering consumer bankruptcy, foreclosures and judgment liens.

They describe: "We use a defendant’s address to match these data at the household level, which allows us to study the impact of pretrial detention on not only the defendant but also on his entire household. This link is key in our study, given that the burden of monetary bail is frequently borne by cohabitating family members. We further use linkages between cases and housing transactions to explore the roles of mortgage debt and home equity in exacerbating or attenuating the effect of pretrial detention on household insolvency.”

The results show “pretrial detention results in higher rates of household insolvency driven by higher rates of Chapter 7 bankruptcies and judgment liens and higher foreclosure rates during periods of decreasing house prices.” The effects, they add, spill over to family members who must rely on home equity to cushion their households from insolvency.

Recent reform to curb money bail—wherein $10,000 has been the median bail bond for a felony—ranges from Illinois eliminating it in 2023 to Maryland in 2017 aiming at reducing the bail amount set by judges.

Apart from such reform activity, and if pretrial detention is unavoidable, “judges should be informed of its financial consequences” for the detainee and his or her household and that those “justice-involved individuals should be offered services and resources during the pretrial phase,” Slutzky and Xu say, adding that their work contributes to emerging research into criminal justice as a system that works “to trap individuals in a cycle of poverty.” This includes legal fees and fines resulting in higher rates of criminalization and employment instability for low-income individuals. especially the extent to which pretrial detention leads to substantial non-bail court fees resulting from pretrial detention, further affecting financial solvency.

The work, they add, contributes to recent findings linking crime and foreclosures. “Prior papers have found that foreclosures are associated with an increase in neighborhood crime, suggesting foreclosures impose significant social costs in addition to the already sizable direct financial costs,” Slutzky and Xu write. “Our finding that criminal detention increases the rate of foreclosures provides evidence of a causal relationship in the opposite direction, raising the possibility that criminal activity and foreclosures can reinforce one another in a pernicious feedback loop.”

Read the study, The Financial Consequences of Pretrial Detention, via SSRN.