Wiktionary
n. (context historical English) A place of temporary confinement for debtors, kept by a bailiff, where debtors were sponged of all money they had on themselves, before being transferred to debtor's prison.
Wikipedia
A sponging-house was a place of temporary confinement for debtors in the United Kingdom.
If someone were to get into debt, their creditor would lay a complaint with the sheriff, the sheriff sent his bailiffs, and the debtor would be taken to the local sponging-house. This was not a debtors' prison, as such, but a private house, often the bailiff's own home. The debtor would be held there temporarily in the hope that they could make some arrangement with the creditors. Anthony Trollope set out the system in his novel The Three Clerks of 1857:
If debtors could not sort matters out quickly, they were then taken before a court and transferred to a debtor's prison.
Sponging-houses had a terrible reputation, which was made clear in a description by Montagu Williams, a London lawyer who knew them well, in his Down East and Up West of 1892:
The idea of the sponging-house was based on that of the sponge that gave it its name, which readily gives up its contents on being squeezed. The sponging-house was the place where debtors had any available cash squeezed out of them, partly to the creditor's benefit, but also to that of the bailiff who ran it.
In French, “éponger une dette” (sponge-up a debt) means to repay one’s debt.
Usage examples of "sponging-house".
I was obliged to go with him, and I am now in the sponging-house, and if I can't get bail by to-day he will take me to Kings Bench Prison.
They talked about arrest for debt, sheriff's officers, sponging-houses and the like for some time, with profound and dear-bought knowledge of the subject, and after a while Jack agreed that a thousand would see his friend clear until he could draw his long-overdue pay and see the factor who looked after his Scottish estate: with a vessel as slow and unwieldy and unlucky as the Berenice there could be no question of prize-money, above all on such an unpromising voyage.
They talked of their poverty - bailiffs - arrest for debt -sponging-houses - fears of more arrests - various expedients -but presently, when these, considerations of wealth and poverty, the wheel of fortune and so on had been dealt with, the zest and cheerfulness went out of the conversation.