What Happens to Joint Accounts or Authorized Users When Main Card Holder Files For Bankruptcy?
Here is a question from a reader:
I have a credit card which I’ve had for years. When my daughter, at age 17, went to college, I got her a card for emergencies. She didn’t sign for it and we didn’t ask for joint account. She used it a few times but since had paid it off. I went through a financial struggle and used the card myself to the limit and now am in BK13. They shifted the debt to her, changed the name on the account and sent it to collections. It now shows on her credit report and we have never given them her SSN. I don’t understand? Can this be?
Mr Donald Harless Jr
Answer – Donald, though you think it is a joint account, it may well be that your daughter is just an authorized user. But I’ll try to explain the consequences of your situation.
If she is just an authorized user
How to find out if she is just an authorized user or a joint account holder with you?
I suggest you ask your daughter to get a copy of her three credit reports (from Experian, Equifax and TransUnion) and thoroughly comb through them. If she is just an authorized user, it will show up as an “A”. If it is a joint account, then it will show up as “J”.
If she is an authorized user, then this are your action steps
(having said that, if you are in the middle of filing for chapter 13, you will be on “automatic stay” which means your creditors are not allowed to contact you)
But what if she is indeed a joint account holder
Since you are filing under chapter 13, by definition, you and your attorney will have to present a payment plan to your creditors. You will have to present a plan to the judge and you will also have what is called a 341 meeting with your creditors. This is when your attorneys should all these sorted out.
I do not know how long you are in the process of your chapter 13 filing, but depending on your state laws, it may or may not be too late to remove your daughter as a joint account holder. And since the account has been sold to a collection agency, it may probably be too late.
But if your daughter is indeed a joint account holder, then your bankruptcy attorney should know about this and have all this sorted because the debt will not be wiped out and you will have to negotiate your payment plan. In this case, you best bet is to consult your BK attorney.
To sum up – There is a higher chance of removing the credit item from your daughter’s credit report if she is an authorized user. But if she is a joint account holder, that is a different story. Her credit report will take a big hit. Best to consult your BK attorney.