Will unpaid restitution slam ex-con's credit?
Credit Score Report
Dear Credit Score Report,
nephew just got out of jail after
three years. He has a very excellent credit history. He also has a restitution
imposed by the judge. As of now, of course, he is going to school to pursue his
education, and he can't pay his restitution yet. Will it affect his good credit
in the long run? I want to help him, and your advice is very much appreciated.
Thanks. -- Dom
By neglecting to pay his restitution, your nephew could very
well could ruin his excellent credit history. That's why he needs to find out if
he's eligible for debt relief, which would give him added time before having to
make restitution payments.
Your nephew has found himself in an all-too-common
situation: Experts say people who have been recently incarcerated often find it
tough to get their finances in order while also readjusting to life outside
prison. "Most of the men in our transitional residential program are
saddled with debt from many agencies, including child support agencies,
probation departments and credit card companies," says Sarah Walker, chief
operating officer of 180 Degrees, a re-entry program based in Minneapolis. "Research
has shown that up to three-fourths of individuals returning from prison have difficulty
making these payments," she says.
But if he hopes to keep his excellent credit history, your
nephew needs to find some way to make those restitution payments. The possible alternative
isn't pretty. "If an individual has unpaid criminal restitution -- an
unpaid fine -- information is frequently sold to collection agencies and will
affect an individual's credit score," Walker says in an email. That's
because collection agencies typically report unpaid debts to the credit bureaus, which will list those collection items as derogatory data on a
borrower's credit reports. (The presence of adverse records, such as judgments
and liens, can also impact a borrower's FICO score, so he may want to see what already
appears on his credit reports following his court case.)
So what should your nephew do? Even if he's struggling to pay
restitution, "it is important not to ignore the debt," Walker says. Instead, encourage your nephew to learn more
about what's expected of him. "In some states and jurisdictions, parole
officers and departments recognize the financial hardships that ex-cons
experience and thus make suitable arrangements for them to pay the restitution
when they are financially capable of doing so. In others, it becomes one extra
burden that those who are reentering society may experience," says Jeffrey
Ian Ross, a professor in the school of criminal justice at the University of
Baltimore. (I reached out to the department of corrections in your nephew's home
state of Nevada -- which you noted in a follow-up email to me -- and the Nevada DOC said rather than being under its authority, such a case is under the authority of the court issuing the restitution.)
Therefore, he needs to do some research to find out what
situation applies to him. First, your nephew should contact those people
involved in his case -- including the judge, court clerk and his parole officer
-- to inquire about opportunities for debt relief. Although it's possible your nephew can apply
for his restitution payments to be temporarily put on hold or reduced, Ross
says perhaps no one has mentioned this to him.
When he contacts these individuals, your nephew should
explain that right now, while pursuing his education, he can't afford to pay
his restitution. Have him put it in writing: Ross says that by sending letters
or emails, he will create a paper trail that shows how he tried to get answers.
Ross also recommends that your nephew make duplicates of those letters and keep
them in a safe place.
Encourage your nephew to keep writing until he confirms
whether or not restitution payments need to begin immediately. "Do not
assume that if you have not heard back from these individuals and offices that
they have somehow magically absolved you from the debt," Ross says.
If he isn't required to make payments now, for the time
being, your nephew can focus on his education. But regardless of what he
learns, to protect his credit history, sooner or later he needs to make those
See related: Ex-offenders face big debt challenges after prison, How to prepare financially for time in prison, 11 tips for dealing with debt collection, collectors, Free credit reports: How to get the actual free one,
Jeremy M. Simon is a former CreditCards.com reporter who wrote about credit scoring, economic data, credit card crime and other issues. He is based in Austin, Texas. He is a graduate of Vassar College and has previously worked for Thomson Financial in New York City, where he wrote about the stock markets, and Texas Monthly, as well as several publications in Austin.
Published: July 12, 2011