What is a Bail Bond in finance?

What is a Bail Bond?

A bail bond is a type of surety bond which is signed by a defendant as an agreement to pay a sum of money as ordered by the court or appear in court for trial. It is cosigned by a bail bondsman; charging the defendant a fee in exchange for a guarantee of payment. Usually, some defendants have the option of bail, but most times cannot afford it due to the high amounts. Instead, they seek the assistance of a Bail Bondsman or a bail agent who either cosigns a bail as the defendant's guarantee of payment or posts bail for the defendant.

Types of Bail Bonds

Civil Bail Bond: This type of bail bond is limited to civil cases as in signing a bail bond against the defendant as a guarantee of payment of a debt with interests and other charges that apply.

Criminal Bail Bond: As the name implies, this type of bail bond is particular to criminal cases against a criminal defendant. It is signed as a guarantee of the defendant’s court appearance and payment for any penalties or fines charged against the defendant.

How Does Bail Bond Work?

When a person is charged to court for a crime committed or legal issues they are presented with the option of bail. The judge then sets an amount for the bail which is most times higher than what the defendant can afford. If the defendant is unable to post their bail they have the option of seeking the assistance of a bail bondsman through a bail bond. For example, a person gets charges $40,000 as bail but earns $20,000 or less per year. Such a person would require the services of a bail bondsman.

A bail bondsman makes money by collecting 10% to 15% of the total bail amount as initial payment from the defendant. For example, if a court sets $15,000 as a bail amount for a defendant. The defendant (or a representative) can pay the bail bondsman $1500 in exchange for a surety for the defendant. In addition, the bail bondsman or agent would also require collateral or some form of security worth at least 90% of the bail. The collateral must be something tangible like a car, house, or expensive jewelry which can be sold to regain the full amount if the defendant fails to show up in court

The money paid for bail is to ensure that the defendant returns to court all through the justice process without necessarily keeping them in custody all through the entire time. It works both ways; to ensure a defendant returns to court or to shorten a defendant’s jail time.