When an individual is convicted of a crime, a jail or prison sentence is supposed to pay their debt to society. But those facing incarceration must prepare financially for what lies ahead in order to prevent emerging with financial scars that can last far longer than their time behind bars. Unless a person makes financial plans before incarceration, their financial assets can vanish and debts mount, hindering efforts to re-enter mainstream society when inmates are released from prison.
A study released in September 2010 by the Pew Economic Policy Group[1], called Collateral Costs: Incarceration’s Effect on Economic Mobility found that prison time significantly impairs an inmate’s ability to earn money to support his or her family later in life. That study provides,
“Incarceration carries significant and enduring economic repercussions for the remainder of the person’s working years,” according to the study. “Virtually all inmates will be released, and when they are, society has a strong interest in helping them fulfill their responsibilities to their victims, their families and their communities. When returning offenders can find and keep legitimate employment, they are more likely to be able to pay restitution to their victims, support their children and avoid crime.”
Three Financial Steps to Take Prior to Incarceration
It is important to speak to the attorneys at Koffsky & Felsen, LLC as soon as possible in the criminal justice process so that they can assist you and protect your rights. If you have been convicted of a crime that requires a period of incarceration, there are many issues, financial and otherwise, that should be addressed prior to your incarceration including:
1. Power of Attorney: It is imperative to 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. 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. It may be necessary to execute a Power of Attorney allowing your chosen individual to receive and open mail, make financial decisions and the like.
2. Joint Bank Account: Set up a joint bank account with the person that you named in a Power of Attorney. Federal anti-terrorism laws passed after the 9-11 terrorist attacks require account holders to provide identification and appear in person at the lending institution when opening an account so any such account must be established before the period of incarceration begins.
3. Credit Cards: Contact all of your creditors and let them know that you will have difficulty making payments for a period of time. Some creditors will work with you so it is important to at least inquire if they will place the account on a reduced payment or hardship program.
4. Protect yourself from identity theft
5. Protecting family (e.g. home mortgage) while you are in prison
6. Setting up a “prisoner” account to pay for extras while in prison (e.g. funds that can be auto-transferred to jail to purchase things from the canteen)
7. Preparing for the financial situation AFTER you get out of prison – unpaid child support, unpaid debts, etc.
Protecting Your Financial Future
Inmates serving long prison sentences may feel that they can ignore their debts and for some it may be true as the state statute of limitations on some types of consumer debts may have expired. It is important to consider that the statute of limitations[2] only limits the creditors’ ability to successfully sue to collect on an old debt. Creditors still can ask for payment even if the debt is time-barred and the unpaid debt remains as 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 that an individual take steps to remove it from their credit report.
[1] https://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs_assets/2010/collateralcosts1pdf.pdf
[2] https://www.consumer.ftc.gov/articles/0117-time-barred-debts
