Dear Credit Score Report,
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My nephew just got out of jail after three years. He has a very excellent credit history. He also has a restitution imposed by the judge. As of now, of course, he is going to school to pursue his education, and he can't pay his restitution yet. Will it affect his good credit in the long run? I want to help him, and your advice is very much appreciated. Thanks.
By neglecting to pay his restitution, your nephew could very well could ruin his excellent credit history. That's why he needs to find out if he's eligible for debt relief, which would give him added time before having to make restitution payments.
Your nephew has found himself in an all-too-common situation: Experts say people who have been recently incarcerated often find it tough to get their finances in order while also readjusting to life outside prison. "Most of the men in our transitional residential program are saddled with debt from many agencies, including child support agencies, probation departments and credit card companies," says Sarah Walker, chief operating officer of 180 Degrees, a re-entry program based in Minneapolis. "Research has shown that up to three-fourths of individuals returning from prison have difficulty making these payments," she says.
But if he hopes to keep his excellent credit history, your nephew needs to find some way to make those restitution payments. The possible alternative isn't pretty. "If an individual has unpaid criminal restitution -- an unpaid fine -- information is frequently sold to collection agencies and will affect an individual's credit score," Walker says in an email. That's because collection agencies typically report unpaid debts to the credit bureaus, which will list those collection items as derogatory data on a borrower's credit reports. (The presence of adverse records, such as judgments and liens, can also impact a borrower's FICO score, so he may want to see what already appears on his credit reports following his court case.)
So what should your nephew do? Even if he's struggling to pay restitution, "it is important not to ignore the debt," Walker says. Instead, encourage your nephew to learn more about what's expected of him. "In some states and jurisdictions, parole officers and departments recognize the financial hardships that ex-cons experience and thus make suitable arrangements for them to pay the restitution when they are financially capable of doing so. In others, it becomes one extra burden that those who are reentering society may experience," says Jeffrey Ian Ross, a professor in the school of criminal justice at the University of Baltimore. (I reached out to the department of corrections in your nephew's home state of Nevada -- which you noted in a follow-up email to me -- and the Nevada DOC said rather than being under its authority, such a case is under the authority of the court issuing the restitution.)
Therefore, he needs to do some research to find out what situation applies to him. First, your nephew should contact those people involved in his case -- including the judge, court clerk and his parole officer-- to inquire about opportunities for debt relief. Although it's possible your nephew can apply for his restitution payments to be temporarily put on hold or reduced, Ross says perhaps no one has mentioned this to him.
When he contacts these individuals, your nephew should explain that right now, while pursuing his education, he can't afford to pay his restitution. Have him put it in writing: Ross says that by sending letters or emails, he will create a paper trail that shows how he tried to get answers.Ross also recommends that your nephew make duplicates of those letters and keep them in a safe place.
Encourage your nephew to keep writing until he confirms whether or not restitution payments need to begin immediately. "Do not assume that if you have not heard back from these individuals and offices that they have somehow magically absolved you from the debt," Ross says.
If he isn't required to make payments now, for the time being, your nephew can focus on his education. But regardless of what he learns, to protect his credit history, sooner or later he needs to make those restitution payments.
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