If you say “bonds” in connection with finance, most people think of the debt instruments that municipalities and other organizations use to capitalize their operations. But bail bonds have also become very big business.
How Bail Bonds Work
When a suspect is charged with a non-violent crime, the judge typically sets bail and releases him or her under the terms of that bail. Most typically, it’s an amount of money that will be given to the court and then forfeited if the defendant doesn’t appear for hearings and trail. Bail conditions don’t even have to involve money, but usually, they do.
Since most defendants don’t have the large amounts of money that the court requires, they must use a bond company. For example, a defendant in Denver would contact a bondsman Denver County CO, who would either supply the funds to the court or be covered under a “blanket bond” if they have that arrangement with the local court. Because the bond company is responsible for this money, they now have an interest in making sure the defendant shows up at court.
How Bond Companies Make Money
Obviously, there is a risk that the defendant will not choose to return to court and potentially go to prison. So the bond companies must charge for their services. Usually, this charge is 10-15 percent of the value of the bail. The cost of forfeiting bail for a defendant who fails to appear is substantial, so most bond companies are in turn insured by companies which specialize in this coverage. This limits the individual exposure of a bail bond company and stabilizes their margins. Bail bond companies employ agents who investigate and look for defendants who have failed to appear. This further limits their losses.
Bail bonds allow defendants with limited resources to be free while awaiting trial. It’s a booming industry which is a large part of the local economy in some areas.