Credit counselors, attorneys and ex-convicts offer 10 pieces of advice on safeguarding your finances if you’re going to jail.
If you’ve been sentenced to jail time, chances are you’re anxious about a lot of things. But not knowing what will happen with your finances might just be the most unsettling issue. Here are 10 tips from credit counselors, attorneys and ex-convicts themselves about managing and safeguarding your financial affairs if you’re heading to prison:
1. Find someone who you trust completely to take over your financial affairs
Inmates who can arrange for someone on the outside to take over car payments or negotiate reduced payments with creditors can emerge from jail without amassing greater debt while inside, experts say.
Fines, fees and interest for everything from credit cards to child support or alimony payments can accrue over the years and make even a small debt grow to large amounts. “Tex,” who asked that his name be withheld, said he’s making plans to keep his bills paid while he’s away in prison. It will be his second prison sentence, and he says he learned from the mistakes he made with his finances 19 years ago after his first conviction.
“The first time around, I didn’t respond to nothing. Not child support notices or anything. After I got out, it was piled up something fierce. It took me years and years to pay that thing down.”
See related: How to deal with creditors when you can’t pay
2. Set up a joint bank account with that person before going to jail
It will be difficult to set up a bank account once you’re incarcerated because federal anti-terrorism laws passed after the Sept. 11 terrorist attacks require account holders to provide identification and appear in person at the lending institution when opening an account.
“We get a number of calls from inmates who, because they didn’t have [bank] accounts open, and they relied on others, they’ve been bilked. They’ve had people take advantage of inheritances they’ve received,” said David O’Neil, a former Texas public defender whose Houston law firm represents prisoners seeking parole or help managing their affairs from behind bars. “We’ve seen some inmates who’ve gotten brokers or set up trusts and had trust officers from responsible banks handle their funds. These seem to work out quite well from our experience.”
3. Consult an attorney
Talk to a lawyer about drafting documents to give someone you trust your power of attorney. This gives the trusted person the legal right to make decisions on your behalf and gain access to checking and savings accounts.
4. Contact all of your creditors
Get in touch with your creditors and let them know that you will have difficulty making payments for a period of time.
“Ask if they can put you on a reduced payment for a while or a hardship program with reduced interest. Some creditors will do it,” advised Andrew Bernstein, an outreach educator with DebtHelper.com in West Palm Beach, Florida. He has conducted personal finance and debt counseling seminars for inmates in state and county jails and prisons in South Florida.
Tex, the ex-convict awaiting another prison sentence, added: “Call the people you need to call. If you have child support, they need to know where you’re at immediately and work something out.”
5. Vehicles may be repossessed
Unless you get someone to take over payments, insurance and maintenance, your vehicle could be repossessed. Again, find someone you trust. There are cases of family members selling the inmate’s car, truck or other possessions for cash.
6. You might not be able to declare bankruptcy
If you’re considering filing for bankruptcy, it may be difficult to fulfill the necessary requirements while in jail. The 2005 bankruptcy law requires debtors to get credit counseling before filing. Although these sessions can be conducted via telephone or the internet, inmates are not guaranteed telephone time, and although Zoom calls have been taking the place of in-person visits during COVID-19, unsupervised internet access is prohibited and physically attending the sessions is impossible.
Laura Bartell, associate reporter of the Laura Bartell Advisory Committee on Bankruptcy Rules to the Judicial Conference of the United States, has studied prisoner attempts to file for bankruptcy while incarcerated. She said inmates who try to file for bankruptcy do so because a spouse on the outside can’t keep up with the bills.
“Some of these prisoners are married, so the debt collector is calling the wife. That’s not a happy situation.”
7. It could be tough to find a lawyer
Prisoners often have a difficult time finding attorneys to represent them. As a result, they file “in pro se,” meaning they act as their own attorneys. The odds are great that the bankruptcy will be rejected.
It may make sense for a prisoner and their spouse to try to file for bankruptcy, Bartell said. “If they are jointly liable for the debt and he had an income and now he doesn’t have an income, and she cannot carry the debt load with her single income.”
But she added, “If they are judgment-proof and have no assets that are not exempt, there’s nothing in it for creditors who sued them. It’s a bother having the debt collection calls, but you can’t get blood from a stone.”
See related: How to recognize a debt collection scam
8. Bankruptcy won’t help you get rid of or discharge several types of debt
Filing for bankruptcy won’t get help with certain kinds of debt, including child support payments, federal student loans and court and restitution costs associated with your crimes. Those debts will remain on your credit record.
9. Alert creditors you are serving time
If debt collectors are calling your family members asking for payment on loans, make sure the collection agency or creditor knows you are serving time. Instruct family members to give the collector the name of the facility so they can call to verify your whereabouts. This may stop collection efforts, although if your spouse is jointly responsible for the loan, the debt collector may continue to seek payment from him or her.
10. Your debt might have expired, but it will remain on your credit report
Inmates serving long prison sentences may feel that they can ignore their debts. And it could be true: By the time they are released, the state statute of limitations on many types of consumer debts (which varies by state) may have expired.
The statute of limitations only limits the creditor’s ability to sue to collect on an old debt successfully. Creditors can still ask for payment even if the debt is time-barred and the unpaid debt remains a bad mark on a credit report for up to seven years. Old debts are commonly sold and resold to debt buyers and that old unpaid loan may show up again years later and require you to take steps to remove it from your credit report.