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What Happens to Your Debt While In Prison?

What Happens to Your Debt While In Prison?

I became a personal finance nerd when I discovered Dave Ramsey’s radio show over a decade ago, and little did I know how much it would do me good when I got arrested and ended up in jail .

Following Dave’s “7 Baby Steps” got me out of debt and saved some cash. If I didn’t have a lot of savings when I got arrested, I’d be in jail for a few months before going to court because if I wanted to get out I’d have to pay a $100,000 bond.

Once I was arrested and my bond amount was found out, my sister cleared my bank account and called the bail bondsman. Within hours, I was out of jail, home to my family, and my savings gone.

After my arrest, I lost my income and savings and moved in with my family, which saved most of my monthly bills. If it’s any indication that I’m going to get the maximum sentence for my crime, I’ll be more financially prepared, but at least I don’t have any rent or utility bills.

All this talk about money and bills leads us to today’s blog post: What Happens to Your Debt in Prison?

In this blog post, I will cover the following topics:

  • How do you prepare financially when you know you’re going to jail?
  • What happens to your bills when you’re in jail?
  • How Prison Can Ruin Your Credit Score

How do you prepare financially when you know you’re going to jail?

If you know you’re going to jail and aren’t financially prepared, it can lead to some serious long-term problems. When you’re in legal trouble, it’s easy to just focus on the legal side of the situation, but if you don’t pay attention to your finances, you could find yourself with a lot less cash and a lot more debt.

If you have a lot of cash in the bank and know exactly how long you’ll be in jail, it’s wise to set up a joint account with someone you trust so they can handle any monthly bills you may have.

If you’re going to be away for a while, be sure to close your credit cards, phone accounts, Netflix account, utilities, etc. Move out of your rental home. If you own a house, it’s almost impossible to pay the mortgage while in jail, so you should probably sell it or allow foreclosure. The same goes for car payments. If you will be away for an extended period, sell your car or allow repossession.

Mortgages and car bills are things you really need to take care of, given the chance. When you are in prison, nothing changes in your financial situation. The billing doesn’t stop and the money will continue to be withdrawn from your account until you turn in the keys and communicate with your lender.

Most inmates do allow their bills to go unpaid because they spent all their money on their cases. When you’re in prison, you won’t be making more than a few dollars a month, so it makes sense to keep all your cash for the prison commissary instead of handing it over to your creditors.

Former prisoner Preston Love, Jr. explained that even those who try to prepare financially before going to prison can face difficulties.

“Before I went to jail, I had a car, cell phone, cable TV and internet, credit cards and many other bills and loans that were being paid,” he said. “I contacted several companies, but many of them said there was nothing they could do before I went to jail. I went to jail and there was still nothing they could do. I had people try to call me to arrange it, but they wouldn’t allow it.”

What happens to your bills when you’re in jail?

When you’re in jail, everything stays the same. If you don’t cancel your Netflix subscription, your utility bills, and close your credit cards, bills and debt will continue to accrue until those services are shut down.

If you don’t have someone to take care of your finances in prison, you’ll walk out the door broke and in huge debt.

How Prison Can Ruin Your Credit Score

Your time in jail won’t show up on your credit report, but if you don’t pay attention to the factors that affect your credit score, that score can be destroyed when you go to jail.

The biggest factor in credit scoring is payment history. Like I said before, for your financial well-being, it is critical to open a joint bank account with a trusted family member or friend before you go to prison so that they can continue to pay you the minimum amount while you are behind bars.

If you don’t pay attention to your finances and just let all your accounts go delinquent, your credit score will be severely affected by a derogatory mark. Markups on outstanding loans and credit cards can take years to recover, and the longer they are outstanding, the worse it is. Repossessions and foreclosures are the kiss of death for credit, but there’s really not much you can do if you don’t have the money.

Most of these negative marks on your credit will remain on your reports for seven years, leading many to file for bankruptcy after release.

If you are able to do financial planning for going to prison, it can help you avoid big trouble down the road. Of course, not everyone has the option to actively spend money. And, when you’re gone, all you can do is start rebuilding.

How bad was your debt when you walked out of prison? Let us know in the comments below.


How to prepare financially for time in prison

What happens to your bills when you go to jail?

How prison can destroy your credit score and what you can do about it