Prisoners and debt
Updated 15 June 2016
Words you may need to know
Debt a debt is a sum of money which has not been paid but which is owed to a person or company
Debtor someone who owes somebody or a company money
Creditor someone who is owed money by someone
Many people are in debt when they go to prison and for many prisoners a debt problem will get worse whilst they are there. Your family also might get into debt because you’re in prison. This fact sheet will help you to deal with your debts and help you get back control of your finances as much as possible.
Examples of debts
Even if you don't have debts when you first arrive in prison, debts can soon build up if you don't deal with your finances quickly. Here are some examples of debts you might have:
1. rent or mortgage arrears
2. parish rates
3. gas and electricity bills
5. credit cards or store cards
6. catalogue debts
7. child maintenance
8. court fines you owe
9. tax and social security debts.
Some debts will be liable to an interest charge. ie an additional sum of money which is charged on the amount of money owing that you do not pay back. Interest rates can be high and the amount of interest you owe on top of your outstanding debt can soon mount up as interest accrues continually (continues to be added) unless it is agreed that this will not happen..
When you first get to prison, make sure that you have claimed all the benefits you have a right to. If you're due a back payment, this could be used to help pay off your debts. Get advice from an advice agency like Citizens Advice Jersey about what, if any, benefits you and your family can get whilst you're in prison. Also, check your tax situation – you may be due a tax rebate when you first go into prison.
When you’re in prison, you're allowed to use your private cash to repay money you owe to creditors. You're also allowed to use your prison earnings to pay back your debts, up to a certain limit. If the only money you have is prison earnings, you'll need to explain to your creditors how much your prison earnings are, how much you’re allowed to spend of this and what you have to use your prison earnings for. This will show them why you can make only very small payments, if at all.
If you've got a bank account, you'll need to get permission from the prison to send out cheques to pay off your debts. If you've got a telephone or internet bank account, get in touch with your bank to change the account to a paper account. This is because you can't use a telephone or internet bank account when you're in prison.
Your debts: Contact the people you owe money to
i. First of all, make a list of all your creditors and try to check what you owe them.
ii. Then, as soon as possible, write to the people you owe money to (your creditors)and explain that your situation has changed. Say why you can't pay back the money you owe and ask them if they will freeze the interest on the debt ( ie not charge you any more interest).
iii. You can also ask your creditors if they will cancel (or ‘write off’) your debt altogether. This is the best option if the only money you have coming in is your prison earnings.
iv. Other options might include asking your creditors to allow you to pay them smaller amounts of money each month or to allow you to make no repayments until your release date.
v. If you have credit or store cards, explain to the company that you can no longer use them. If possible, get the cards cut up and sent back to the company or store who gave them to you.
vi. At the end of this fact sheet, there is a sample letter that can be used to write to creditors. Make sure you date your letters and keep copies of each letter you write.
If you delay contacting your creditors, your debts will just get bigger, especially if they charge late payment charges and interest. Also, your creditors could take you to court to get court judgements against you to confirm that you owe them money. This will make it difficult for you to get credit when you leave prison .
So, if you need time to get all the details of your debts, it is best to write just a brief letter to your creditors to say that you are in prison. This is known as ‘a holding letter.’ Ask them if they will freeze interest and late payment charges until you have been able to get advice about what to do next. Once you have got all the details you need follow paras. ii – vi) above.
Remember, you will need to make arrangements for your mortgage or rent to be paid or put on hold whilst you are in prison if you want to keep your home and not risk losing it.
Ask the prison staff if an advice agency like Citizens Advice Jersey or Community Savings run sessions in your prison. If so, you could ask for an appointment with an adviser to see if they can help you.
Paying back what you owe
If a creditor agrees that you can pay back a small amount, start paying as soon as you can. Make sure you don’t miss any payments. A creditor will usually only agree a small payment for a short period of time, usually three or six months. Then they will contact you again to find out whether your situation has changed. If you get any letters asking for an update about your situation make sure you reply and ask your creditors to carry on freezing the interest charges.
Check the amount of money your creditors say you owe on any statements or letters you are sent and make sure that interest hasn't been added if you had agreed that interest would not be charged while you are in prison.
When you're in prison, you have the right to sell your personal property. You could use the money to pay off your debts. You should get advice from an advice agency like the Citizens Advice Jersey before you sell your personal property. In particular, it is very important to get advice if you're thinking of selling your home. Also, if you are still on remand and not yet found guilty the Police Liaison Officer will need to be consulted if you want to sell your home.
You can't take out any further loans when you’re in prison. For example, you can't remortgage your home to release money to pay off your debts. However, if you have a joint mortgage, your partner may be able to remortgage the property if he/she can afford the extra mortgage repayments. They should get financial advice before deciding to do this.
Someone else may be responsible for your debts. For example, if you took out a joint loan, the other person is responsible for the whole of the debt. Also, if you were living with someone and you got into arrears with your parish rates, the other person may be responsible for the whole of any rates arrears.
But if you took out a loan in your name, no one else is responsible for your debt. Your family don't have to pay. Your may feel your creditors are putting pressure on your family members to pay your debt. This is against the law. Get advice about what to do if this is happening.
Mortgage and rent arrears
It is very important for you to sort out mortgage arrears and rent arrears because otherwise you could lose your family home. There are rules about payment of benefits for your home if you’re in prison. These rules depend on how long your sentence is. If you have family living in the family home, make sure they get advice from an advice agency like Citizens Advice Jersey about how they can keep the home. If you lose your home, get advice from Citizens Advice Jersey about how your family might be able to get rehoused eg by Andium Homes (the new agency set up by the States to manage social housing).
Courses to help you control your finances
Your prison may run courses to help you get back in control of your finances. These courses can help you sort out your debts and also help you to claim benefits, make budgets, run a bank account and understand more about managing your money and staying in credit.
Citizens Advice Jersey Tel: 08007 350249
Citizens Advice Jersey gives free, confidential, impartial and independent advice on a number of subjects to help you. This advice may include:
1. Writing letters
2. Researching benefits
3. Sample debt letters
5. What happens on leaving prison
6. Housing issues
Community Savings Ltd. Tel: 01534 737555
Can assist with the provision of basic account while you are in prison. You can save money in this account from prison earnings or any monies received whilst in prison and you can also arrange for standing orders to be paid out from it eg to creditors. Upon release, if you have saved regularly, you may be eligible for some emergency funding to help you start your new life