What Happens to Your Debt When You Go to Jail?

Going to jail or prison can disrupt your routine in a very big way. If you've been sentenced to a term in jail or prison, you may be wondering what happens to your debt during that time. 

Let's review what happens to your debt when you're incarcerated and what steps you can take to prepare your finances. 

Do You Still Have to Pay Your Debt When You're in Jail?

You might assume that your financial obligations, including debts, will go away or go on pause if you're in jail. But you're still responsible for making your monthly debt payments even from behind bars. 

If you don't make debt payments, you could face serious consequences. If you’re imprisoned and don’t pay your:

• Mortgage: Your lender could seek to foreclose on your home.

• Auto loan: Your car could get repossessed.

• Credit cards or personal loan: Your creditors could sue you. If you can't respond to the lawsuit because of incarceration, a court might enter a default judgment against you, which could lead to frozen bank accounts or wage garnishment.

Does Debt Still Accrue Interest When You're in Jail?

Generally speaking, most of your debts will continue to accrue interest when you're in jail. This includes credit cards, personal loans, auto loans, and mortgages. 

Can You Put Your Debts on Pause if You're in Jail?

In some cases, you may be able to pause certain debts while you're in jail. Some of your lenders may allow you to put your debt into forbearance, which could help you avoid major credit score damage.

If you have federal student loans, you may qualify for deferment or forbearance while you're in jail. Contact your loan servicer to find out what options you have.

What Happens to Your Credit Score When You're in Jail?

Being in jail won't automatically cause your credit score to drop. Your credit score is a measure of whether you pay your debt on time and manage it well. It has nothing to do with your prison record.

That said, being in jail could mean you miss loan and credit card payments. Missed payments are reported to the credit bureaus after 30 days, which can cause your credit score to drop.

Also, if you're unable to monitor your credit while you're in jail, you may be more likely to fall victim to identity theft. If a scammer opens new loans or credit card accounts in your name and doesn't make payments, it could have a negative impact on your credit score until you're able to sort things out.

How to Prepare Your Finances if You're Going to Jail

It's natural to be worried about how going to jail might impact your finances. Here are some steps you can take before going to jail or prison to protect yourself. 

Schedule automatic bill and debt payments

If you have the money to keep up with your bills and debts while you're serving time, putting them on autopay could help you stay current and avoid unwanted consequences. If you're sentenced to 18 months in prison, for example, and you set up 18 months' worth of automatic mortgage payments, your mortgage loan should remain up to date and safe from foreclosure.

Talk to your lenders about hardship programs

If you'll be spending time in jail or prison and not earning your regular salary, you may have trouble keeping up with your debt payments. Talk to your lenders about your situation and ask if there are any hardship programs you can take advantage of. You can also ask your credit card companies to put your debt into forbearance while you're in jail.

Authorize someone to manage your finances for you

You may not be able to manage your own finances while you're in jail. It's smart to appoint a financial power of attorney who can take over for you. That person can make sure your bills and debts get paid on schedule, provided you have the money to cover them.

Freeze your credit reports and credit cards

If you're unable to monitor your credit while you're in jail, you risk falling victim to identity theft. That's why it's a good idea to freeze your credit before going to jail or prison. To do a credit freeze, contact the three major credit bureaus—Equifax, TransUnion, and Experian—and follow their instructions. 

If your credit is frozen, lenders and credit card issuers will be barred from doing a hard inquiry on your credit report, which means you shouldn't have to worry about new loans or credit cards being opened in your name. You can then un-freeze your credit once you're released.

Additionally, you can freeze any credit cards through your online account or banking app. Freezing your credit cards means they can't be used to make new purchases. Just make sure you're not using those cards to autopay any bills.

What Happens to Your Debt After You're in Jail?

Just as you're responsible for paying your debt while you're in jail, you’re also required to make payments after you're released. If you fell behind on any debt payments while you were in jail, your best bet is to reach out to your creditors, explain the situation, and learn what arrangements you can work out. 

If you didn't make arrangements to pay your debts while you were in jail, you may have some debts in collections. Your credit score may have also taken a hit from not paying your debts. 

If you need help managing your debt after getting out of jail, you have a few options. You could work with a nonprofit credit counseling agency and get onto a debt management plan. Credit counseling tends to work best when you have steady income and can afford your payments.

When you can't afford to pay your full balances, consider debt relief. A debt relief company may be able to negotiate a debt settlement on your behalf. This could allow you to pay less than you owe and have the rest of the debt forgiven.

Remember, being in jail could take a toll on your finances. But once you're out, you can take steps to rebuild your credit, catch up on your debt, and move forward.