In 1993, Kerman became romantically involved with Catherine Cleary Wolters (Nora Janson in her memoir), a heroin dealer working for an alleged Nigerian kingpin. Kerman laundered money for the drug operation.
In 1998, Kerman was indicted for money laundering and drug trafficking; she subsequently pleaded guilty. Beginning in 2004, she served 13 months of a 15-month sentence at FCI Danbury, a minimum security prison located in Danbury, Connecticut.
Kerman has stated, "I'm bisexual, so I'm a part of the gay community". She says she came out of the closet around 18 years old and has identified as a lesbian for most of her youth. On May 21, 2006, Kerman married Writer Larry Smith, who created the popular concept of Six-Word Memoirs.
Kerman published her best-selling memoir about her experiences in prison, Orange Is the New Black: My Year in a Women's Prison, with Spiegel & Grau in 2010. A television adaptation of the same name created by Jenji Kohan, the Emmy award-winning creator of Weeds, debuted on July 11, 2013 on Netflix. Kerman's character in the series ("Piper Chapman") is played by Taylor Schilling. The series was renewed for a fourth season on April 15, 2015, before the third season premiered on June 11, 2015. A fifth season was released on June 6, 2017.
On February 25, 2014, Kerman testified at a hearing on "Reassessing Solitary Confinement" before the Senate Judiciary Subcommittee on the Constitution, Civil Rights and Human Rights chaired by Assistant Majority Leader Dick Durbin.
In a May 2015 interview with the Columbus Dispatch, Kerman confirmed that she and Smith are living in Columbus, Ohio, and that she is teaching writing classes at the Marion Correctional Institution and the Ohio Reformatory for Women in nearby Marysville, Ohio.