What Happens to Your Debt While In Prison?

By Prison Insight Staff

Updated: January 29, 2020

I became a personal finance nerd more than a decade ago when I discovered Dave Ramsey’s radio show, and little did I know how much that would benefit me when I was arrested and eventually went to prison.

Following Dave’s, “7 Baby Steps,” allowed me to get rid of my debt and save up some cash. If I wouldn’t have had substantial savings when I was arrested, I would have sat in jail for months before going to trial because I had a $100,000 bond to pay if I wanted to get out.

As soon as I was arrested and found out the amount of my bond, my sister cleaned out my bank accounts and called the bail bondsman. Within hours, I was out of jail and home with my family with my savings depleted. 

After my arrest, I moved in with my family because I lost my income and my savings, so that cut out the vast majority of my monthly bills. If there was any clue that I would receive a maximum sentence for my crime, I would have done more financial preparation, but at least I didn’t have any rent or utilities.

All of this talk about money and bills leads us to today’s blog post: what happens to your debt while in prison?

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

  • How do you prepare financially when you know you are going to prison?
  • What happens to your bills when you go to prison?
  • How prison can destroy your credit score

How do you prepare financially when you know you are going to prison?

If you know you are going to prison and don’t prepare financially, it could cause some serious long-term problems. When you get in trouble with the law, it’s easy to just focus on the legal aspect of the situation, but if you don’t pay attention to your finances, you will find yourself with a lot less cash and a lot more debt.

If you have a substantial amount of cash in the bank and know exactly how long you are going to be behind bars, it’s smart to set up a joint account with someone you trust, so they can take care of any monthly bills you might have.

If you are going to be gone for a while, be sure to close your credit cards, phone accounts, Netflix accounts, utilities, etc.. Move out of your rental. If you own a home, it will be nearly impossible to pay a mortgage while you are behind bars, so you should sell it or allow a foreclosure. The same thing goes for car payments. If you are going to be gone for a long time, sell your car or allow a repossession. 

Mortgages and car notes are something you really need to take care of if you have the chance. Nothing changes with your finances when you go to prison. The bills don’t stop, and that money will continue to come out of your account unless you turn in the keys and communicate with your lender.

Most inmates do allow their bills to go unpaid because they are spending all of their money on their case. When you get to prison, you won’t earn more than a few dollars per month, so it makes sense to keep any cash you have for the prison commissary instead of giving it to creditors.

Former inmate Preston Love, Jr. explains that even those who attempt to prepare financially before prison will have a hard time.

“Before I went to jail, I had a car, cellphone, cable and Internet, credit cards, and many other bills and loans that were being paid,” he says. “I contacted a few of the companies, but many of them said there wasn’t anything they could do until I was in jail. Once I was in jail, there was still nothing they could do. I had people try to call and make arrangements for me, but they wouldn’t allow them.”

What happens to your bills when you go to prison?

Everything stays the same when you go to prison. If you don’t cancel your Netflix subscription, your utilities, and close your credit cards, the charges and debt will continue to accrue until those services are shut off.

If you don’t have someone to take care of your finances when you are in prison, you will walk out of the gates with no money and massive amounts of debt.

How prison can destroy your credit score

Your time in prison doesn’t show up on your credit report, but if you don’t pay attention to the factors that contribute to your credit score, that score will be destroyed while you are behind bars.

The biggest factor of a credit score is payment history. Like I said earlier, it is essential for your financial health to set up a joint bank account with a trusted family member or friend before going to prison, so they can keep making minimum payments for you while you are locked up.

If you don’t pay attention to your finances and just allow all of your accounts to go delinquent, your credit score will be harshly affected by the derogatory marks. Marks for unpaid loans and credit cards can take years to bounce back from, and the longer they go unpaid the worse it gets. Repossessions and foreclosures are the kiss of credit death, but if you don’t have any money, there’s really nothing you can do about it.

Most of these negative marks on your credit will sit on your report for seven years, and that leads to many people filing for bankruptcy when they are released.

If you are able to financially plan for prison sentence, it can help you avoid major trouble in the future. Of course, not everyone is going to have the option of being proactive with their money. And, all you can do when you get out 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

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