How to Get Rid of Debt After Prison

A prison sentence doesn't rid you of debt. Chances are that by the time you are released, many if not all of your debts will have been charged off and sold to collection agencies. Charge-offs usually occur on unsecured debts, such as credit cards, when you fall six months behind and the original creditor gives up on trying to collect. Secured debt requires collateral, and after about three months of missed payments, creditors will repossess automobiles or foreclose on houses. Once you are released from prison, you may face debt related to both unsecured and secured credit accounts.

Instructions

1

Get a copy of your credit reports from all three major credit bureaus--Experian, Equifax and TransUnion. You're entitled to free copies from the website Annual Credit Report, which was set up by the bureaus to offer free reports as required by law. Go to the website and click on "Request Report," or call 877-322-8228.

2

Check your reports for a list of your debts. Also look for civil judgments that creditors may have won against you in court. Make a list of all your debts and prioritize them. You may decide to rank them from the highest dollar amount to the lowest, or you may list judgments first. The ranking may help you form a strategy if you decide to attack the debts one at a time.

3

See a nonprofit debt counselor from Consumer Credit Counseling Service or a similar organization. You can find listings in the telephone directory. Or ask your probation officer or prison counselor for a referral. Tell the debt counselor you're newly released from prison and facing old debts.

The counselor will be able to advise you on strategies such as bankruptcy, and should also be able to tell you if the statute of limitations for filing additional lawsuits on your debts has passed. Statutes of limitation vary by state, according to Microsoft Money, but the site says that generally, creditors have three to six years to sue you and win judgments. After that, they can continue trying to collect by calling and writing, but can no longer take you to court.

4

File for bankruptcy. Bankruptcy could be a viable option if you've already lost everything because of your incarceration. Your house, automobile and other assets could all be gone, leaving only a pile of debt. With no real assets to protect, bankruptcy could be a logical choice. See a bankruptcy attorney for advice.

5

Settle your debts. Once you're working again, save some money and pay the debts one at a time. Depending on how long you've been away, debt collectors may be willing to settle for as little as 20 percent of the balance. Make an offer to the debt collectors by sending them a postal letter, and really stick to your initial offer if the statute of limitations for suing on the debt has passed.

Keep chipping away until you have gotten rid of all of your debt. Or, if you'd rather pay in full, set up payment plans and pay until you've exhausted all debts.