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If you’re convicted of a crime, your jail or prison sentence is supposed to pay your debt to society. But those facing incarceration rarely prepare financially for what lies ahead, and often emerge with financial scars that can last far longer than their time behind bars.

Each year, millions of people end up serving time in jail or prison in the United States, leaving behind angry victims and broken families. Many are impoverished, and come out as broke as they went in.

Some were living more substantial financial lives and leave behind businesses, mortgages and mountains of debt. Unless they’re tended to, the financial assets can vanish and the debts mount, hindering efforts to re-enter mainstream society when inmates are released from prison

Credit counselors, bankruptcy experts, criminal defense attorneys and ex-convicts say steps can be taken to help inmates with debt minimize the hit on their finances, but few, if any, jails and prisons across the country routinely counsel people before entering jail or prison about guarding their finances.

“The prison was pretty much useless, as far as providing information such as that,” says Alice Gerard, a New York state journalist who served three different prison terms for trespassing on military bases during protests. “I set up a joint bank account for my dad and me. When I was in prison, he was able to write checks on the account to pay for my credit card bills.”

Gerard’s preplanning helped her preserve her credit score. However, inmates who care what happens to their bills often don’t know what options are available to them, such as finding someone they trust to open a joint bank account before they are jailed. (See Tips for protecting your credit while serving time.)

It may be hard to work up sympathy for convicted criminals, but experts say their money woes are serious:

Many often don’t have much advance warning of their incarceration — and don’t have time to make the necessary arrangements to have their bills paid.

A small fraction of inmates have outstanding mortgages, car loans and credit card bills that may go unpaid while they serve their time. With back interest, fees and fines, the debts can quickly grow to unmanageable levels over time.

A few people end up filing for bankruptcy, although it is difficult to do so from behind bars. Others arrange for family members to take over payments for them.

People who serve time are rarely able to earn the same incomes they did before jail. As a result, their children and families struggle to make ends meet.

Some report being victims of identity theft and fraud — often from their own relatives and friends.

The few with the means to hire attorneys arrange for a trusted family member or friend to have the legal right (called a power of attorney) to oversee their affairs.

I set up a joint bank account for my dad and me. When I was in prison, he was able to write checks on the account to pay for my credit card bills.

Experts say many inmates, overwhelmed with their legal problems, just let the bills go unpaid. Preston Love Jr., a Pennsylvania man who says he was released from prison in early 2010, faces a wall of debt now. He says he tried but failed to work out payment arrangements with creditors both before and after he went to prison.

“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.”

Debt collectors “still call and did call while I was locked up and they were told the situation. Now that I’m out, it’s harder to find work and make the money I was. I started out with about $35,000 in debt and now I am well over $40,000,” he says.

According to figures compiled by the Bureau of Justice Statistics, about 2.4 million people were held in local or county jails or state or federal prisons across the United States as of June 30, 2009. Some serve very little time before posting bail while others are in for a few months, three to five years or longer, depending on their sentences.

Long-lasting financial impact

A study released in September 2010 by the Pew Economic Policy Group, 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.

“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.”

Going to jail — even for as little as three months — may wreck credit reports. Experts say prisoners with debts often end up defaulting on car loans, credit card bills and other financial obligations they may have when they’re taken into custody. Those who are married leave spouses behind to carry the debt load and fend off debt collectors with just one income instead of two or no earnings at all.

Essentially, you’re turning everything over to somebody else. It’s got to be somebody that’s not going to screw you over.

“It’s almost like somebody has died and you don’t have the second income coming in anymore,” says Laura Bartell, a scholar with the American Bankruptcy Institute, who has studied inmates’ frustrated efforts to file for bankruptcy while incarcerated. They are often thwarted by requirements in the 2005 bankruptcy law that debtors undergo credit counseling prior to filing and appear at different hearings. “Some of these prisoners are married, so the debt collector is calling the wife. That’s not a happy situation.”

Ed Ross, a spokesman for the Federal Bureau of Prisons, said there is no “definitive” policy on what federal prisoners are told during intake procedures about taking care of their personal finances. “Inmates can protect legitimate business interests by executing powers of attorney. We allow that to happen. But we do not facilitate inmates paying their bills. That all has to be scheduled from the outside.”

He adds: “Any financial responsibility you have on the outside unrelated to court orders, you’re on your own.”

Restricted access

Jail and prison policies vary across the country and by facility, but they typically do not allow inmates to conduct personal business affairs from behind bars.

Mail is restricted — some facilities allow only postcard correspondence unless it is from the inmate’s attorney. Telephone privileges are limited, may be revoked at any time for disciplinary reasons or may be unavailable if the inmate doesn’t have money to pay for the call. Prisoners must turn over all items in their possession at the time of their arrest or when they report to prison, including any checkbooks, credit cards or wallets. Those items are placed in a property bag and are supposed to be sealed until the inmate’s release.

BEHIND BARS: U.S. JAIL AND PRISON POPULATION

About 2.4 million people are held in local or county jails or state or federal prisons across the United States. Some serve very little time before posting bail while others are in longer, depending on their sentences. Experts say few take steps to safeguard their finances while they’re serving time.

“The general rule in Texas is someone in prison cannot be engaged in private employment,” says Texas attorney Bill Habern, whose law firm specializes in representing inmates seeking parole or help with their affairs while incarcerated. “You are a prisoner. You are owned by the state. You are an indentured servant for the length of the sentence. There is a constitutional proclamation that says you are as much a slave as if it was the antebellum era.”

He adds: “That doesn’t mean that a guy who has a business can’t have a lawyer or a representative come in and handle his business that way. In the federal system, you can have people come in almost daily to visit you. You can certainly have your legal counsel or someone working for the firm run errands.”

A pre-jail checklist

Habern, who gives seminars to criminal defense lawyers on preparing their clients for prison, developed a checklist to help convicted clients ease their transition into Texas jails. It includes such things as getting medical and dental records to document any physical ailments, but also requesting deferrals of child support payments until after release and how much money to take with you to prison. (See Sending money to loved ones behind bars.)

According to Habern’s checklist: “Running a business from prison is hard since there is limited phone access. It is difficult, but we have seen some inmates who could maintain control of certain types of management decisions via weekend visits and letters. Remember that both incoming and outgoing mail is read by people who don’t make much money, and any exchange of bank account numbers, credit card receipts, etc. should be strictly avoided.”

Must be present to open bank accounts

If prisoners haven’t set up joint bank accounts with family members, brokers or trustees before going to jail, it’s virtually impossible to do so after they’re behind bars, says Habern’s law partner, David O’Neil. “Inmates can’t set up bank accounts,” says O’Neil. “We’ve called numerous banks, but they all tell us the same thing. You have to be physically present to set up bank accounts.”

After the Sept. 11 attacks, banking rules were changed to prevent terrorist activity. Anyone opening a bank account must appear in person and show valid photo identification.

Habern says an example of a prisoner most likely to need help managing his or her finances may be a successful mechanic at an auto dealership who gets a third DWI conviction and is sentenced to several years in prison. The person may have a family and won’t be able to pay the mortgage and their family car gets repossessed.

According to the Pew study, families and children experience collateral damage from the incarceration. Children are more likely to perform poorly in school and household incomes are reduced. “Family income, averaged over the years a father is incarcerated, is 22 percent lower than family income was the year before a father is incarcerated. Even in the year after the father is released, family income remains 15 percent lower than it was the year before incarceration,” according to the Pew study.

You are a prisoner … you are as much a slave as if it was the antebellum era.

Prison work pays little

Since outside work is restricted, some inmates count on prison jobs to earn money to send home to their families. Many prisons across the country have inmate work programs, but wages are minimal.

Bill Habern

In addition to personal debts, inmates may have child support or alimony payment obligations or owe thousands of dollars in court costs, legal bills, fines or victim restitution. Across the country, court clerks and state corrections officials may aggressively go after ex-convicts to collect that money.

In Connecticut, for instance, corrections officials “identify offenders who have an ability to pay for their incarceration and those cases are pursued,” Brian A. Garnet, director of external affairs for the Connecticut Department of Correction, wrote in an e-mailed response. “This could include such things as an inheritance, insurance settlement, etc.”

He added: “The only money offenders have access to in prison in Connecticut is what is in their inmate account. This is money that either they brought in with them or is deposited on their books by someone who is on their visiting list. They do not have the ability to transfer funds from an outside account.”

Trust account pays for prison ‘extras’

Correctional facilities set up what are called trust accounts for each inmate to receive money from friends or family members to help them buy food and supplies while incarcerated. If an inmate has money in his or her inmate trust account, some facilities deduct money from the account to help pay inmate fines, court costs or other fees. Ten percent to 20 percent or more of the money deposited into these accounts may be set aside to pay fines.

Habern says in Texas, “the district clerks of the various counties will engage in a pretty aggressive collection process. The inmate that has money is well advised to set up a means by which that money cannot be attached. A good lawyer can take care of that.”

Wages earned in prison jobs are also deposited into the trust account. An inmate can request that some of the earnings be sent to a spouse to help pay bills or child support obligations, but it is typically a small amount of money.

Identity theft and fraud

Another downside to not being able to take care of their financial affairs is that inmates may become victims of identity theft and fraud — often at the hands of their own relatives.

“Wives, parents, girlfriends, boyfriends — they take their assets,” says Andrew Bernstein, a certified personal finance counselor with DebtHelper.com, a West Palm Beach, Fla.,-based credit counseling agency. Bernstein has gone to prisons and jails in Florida counseling inmates before their release about putting their finances in order.

“I tell people going in to get a reliable person — somebody that you trust with your life — and make them power of attorney for your bills, for your home,” Bernstein says. “Essentially, you’re turning everything over to somebody else. It’s got to be somebody that’s not going to screw you over.”

He has heard what can happen when things go wrong. For instance, the inmate’s car or truck may be sold. “If it’s already paid for, they will sell it to get the cash. With credit cards, they forge them and max them out,” Bernstein says. “One woman in the women’s program found out her ex-spouse actually took her business away. She had a business worth hundreds of thousands of dollars. But by her lack of being there to do anything, and because there was such limited communication, she couldn’t do anything about it.”

Now that I’m out [of jail], it’s harder to find work and make the money I was. I started out with about $35,000 in debt and now I am well over $40,000.

When the woman was released from prison, she was facing embezzlement and fraud charges related to her ex’s actions, he says.

“We get a number of calls from inmates who, because they didn’t have access to accounts and they relied on others, they’ve been bilked,” says O’Neil, the Texas attorney. He is a former U.S. Marine who headed the Texas prison public defender system for five years before going into private practice in Houston.

“They’ve had people take advantage of inheritances that they’ve received. We’ve seen some inmates who’ve gotten brokers or set up trusts and had trust officers from responsible banks handle their funds. These seem to work out quite well from our experience. Sometimes it works out well with family members.”

O’Neil says inmates who expect to get inheritances from aging or wealthy parents while they are incarcerated or those who may receive money (such as settlements) should set up trust accounts before they go to jail. “Something should be done for those with means or those who expect to have means,” he says.

Gerard, the New York protester, served three prison sentences — one for 90 days, the others for six months each. Her protests targeted the Western Hemisphere Institute for Security Cooperation, formerly called the School of the Americas, at Fort Benning, Ga., a controversial facility that trains Latin American soldiers and has been labeled by its critics as a school for “torturers and dictators.”

Gerard says things worked out well with her family handling her affairs: “This was something that my dad and I discussed, and we agreed that it would be a good idea to include his name to my checking account. That way, he could take care of the bills while I was away.”

See related:How going to jail impacts your credit, Ex-offenders face big debt challenges after prison