If you’re at risk of going to prison and you have debts, you may want to address them before you’re sent to prison.
Your finances may not be at the top of your priorities at a time like this but it can help you a lot if you take care of them before going inside.
Today, I’ll be discussing what exactly happens to your debt if you go to jail and what steps you can take in order to stop it from spiraling out of control.
I Might be Going to Prison and I have Debt. What will Happen to it?
It’s definitely a good idea to plan ahead with your debts if you feel that you’re going to be in prison soon.
It’s important to communicate with your creditors and keep them informed of your situation. If you don’t do this, then you may find that your situation has become a lot worse once you’re finally released.
Creditors can still take action against you for your debts while you’re inside prison and you would not be able to do anything to counter it.
For example, your creditors can still pursue court action such as a County Court Judgment (CCJ) against you. They can also make moves to make you bankrupt while you’re in prison.
If you have arrears on priority debts such as Council Tax bills, then certain steps may be taken in order to retrieve this debt from your benefits and wages.
While this may not affect you since you’re in prison, it may affect your loved ones and relatives who are depending on your salary in order to live.
If you have rent arrears, then your tenant could kick your family out of your home while you’re in prison.
If you have utility arrears such as electricity or gas, then your energy provider could apply for a warrant to cut off the supply to your home, leaving your family in a predicament.
It’s true that some of your debts may become statute-barred while you’re in prison but this isn’t always the case.
This is why I always suggest that you take some concrete steps in order to ensure your creditors won’t take any drastic action against you while you’re in jail.
I’m About to be Sent to Jail with Debt. What Steps Should I Take?
If you have a court hearing coming up and you feel that you’re going to be sent to jail after it, I highly recommend that you take some steps in order to ensure your debt doesn’t get worse while you’re inside.
Firstly, you should contact your creditors and inform them of your situation. Tell them when you’ll be going to jail and approximately for how long (if you have an idea of it).
You can also ask them if you could appoint a person (such as a trusted friend or family member) who could handle your account while you’re inside. It would be quite convenient for you to do this as dealing with your creditors while you’re in jail could get very difficult.
Depending on your creditor, you may be allowed to appoint a person over the phone but other companies may require you to do this in writing so that they have some sort of proof.
If you are unable to contact your creditors before going inside, you can try to get in touch with them once you’re in jail. Your access to a phone will be limited so it might be a good idea to ask a friend or family member to do this for you.
If you owe money, it’s highly likely that just your income will be enough to take care of your debts. Thus, you might need to ask your creditors for a payment break.
You can even take steps when you’re inside in order to take care of your debts, for example, by going bankrupt. However, this could be very difficult to arrange and might not even be the best option for you either.
What is a Payment Break?
A payment break (also known as a payment holiday) is an agreement between you and your creditors which states that you won’t be paying any money towards your debt for a certain period of time.
A payment break can be opted for if you’re struggling with your debt and it can also be opted for in certain other circumstances e.g. if you’re going to jail.
You must keep in mind that the missed payments during this period are treated as arrears and extra charges as well as interest may continue to be added.
Thus, once your payment break, you will most likely see an increase in your monthly payments and you will ultimately have to pay a larger amount of money overall.
Your missed payments are also logged within your credit file and thus, will make it quite hard for you to secure credit in the next six years.
Can You Go to Prison for Debt in the UK?
About a hundred years ago, not being able to pay back the money you owe had a real risk of you going to jail. However, in the modern age, it’s very unlikely that you’ll be imprisoned for being unable to pay your debts.
You must keep in mind that it is not a criminal offence to be unable to pay off your debts. If you’re struggling with your debts, there are many debt solutions in place that you can opt for in order to better your financial situation.
That being said, there do exist some types of debts that hold a small risk of you being imprisoned. These debts are:
- Criminal fines
- Council Tax
- Child Maintenance Arrears
Keep in mind that even for these types of debt, imprisoning you is the last resort. You will only be imprisoned if the court deems that you can afford to pay back the money you owe but you’re deliberately refusing to.
You’re not going to be imprisoned if the court finds that you simply can’t afford to pay the debt. In this case, steps will be taken to either reduce the amount of money you owe or to create a repayment plan for you which would make the repayments more affordable to you.
As for unsecured debt from creditors registered in England and authorised and regulated by the Financial Conduct Authority, there’s no risk of you being imprisoned for not being able to pay your debt.
Your credit score can take a major hit, you could go bankrupt, you won’t be able to secure most types of credit in the future; These are the worst things that could happen to people if they owe a debt they can’t afford to make payments for. People are not imprisoned for this.
If you’re about to go to prison, then dealing with your debt and finances will most likely not be on your mind.
However, I highly suggest that you take some out to address it before going inside as it will help you out immensely once you’re released.