When you file for bankruptcy, it's important to understand how it affects joint holders and authorized users of your credit accounts. If you file for bankruptcy jointly with your spouse, you don't need to worry about the impact on joint accounts. However, if only one spouse files for Chapter 7 or Chapter 13 bankruptcy, or if a friend, parent, child, or relative who is an authorized user or joint holder on your credit account files for bankruptcy, you need to be aware of the implications.
Does It Affect the Other Person’s Credit If I File Bankruptcy as an Authorized User on Their Credit Card?
If you're an authorized user and file for bankruptcy relief, it shouldn't affect the primary cardholder's credit rating. As an authorized user, you're added to someone else's credit account and can use it, but you're usually not legally responsible for repaying the debt. The credit card company can only hold you liable if you've signed a credit agreement accepting financial responsibility for the debt.
It's a good idea to inform the primary cardholder if you plan to file for bankruptcy. While a notation of your bankruptcy filing may appear on the cardholder's credit report, it shouldn't impact their credit score.
Overall, filing for bankruptcy relief as an authorized user shouldn't harm the primary cardholder's credit rating. However, it's important to communicate openly with them to avoid any potential misunderstandings.
Authorized User Credit Reports
When you file for bankruptcy, some creditors may mistakenly report it on your credit report. To avoid any negative impact on your credit score, it's essential to review your credit reports and ensure that the bankruptcy filing is either not mentioned or only noted in a way that doesn't affect your credit score.
Fortunately, you can obtain free copies of your credit reports once every 12 months. Just visit annualcreditreport.com to get started.
What is the Cost and Do I Qualify For Chapter 7 Bankruptcy?
Before you dive into the bankruptcy process, it's important to understand if you're eligible for bankruptcy and how it compares to other options. For instance, if you don't qualify for Chapter 7 bankruptcy, you may want to consider what the Chapter 13 plan payment would be.
Fortunately, we've created a Chapter 7 vs Chapter 13 calculator that uses official bankruptcy forms to help you estimate the cost and eligibility for Chapter 7 bankruptcy, and compare it to Chapter 13 bankruptcy.
What If I Am a Joint Holder on a Credit Card and File Bankruptcy?
When it comes to joint credit card accounts, each account holder is responsible for the entire debt, regardless of who made the purchases. This means that if one person fails to make a payment, the other person is still on the hook for the entire balance. This is also true for co-signers. So, if you're considering opening a joint account, it's important to keep this in mind.If you file for bankruptcy, you may be able to discharge your legal obligation to pay off unsecured debts through a Chapter 7 or Chapter 13 case. However, if your joint account holder did not file for bankruptcy relief, they are still responsible for the entire debt on the account. This means that even if they never made any purchases, they are still legally liable for the debt.If the creditor is unable to collect the debt from you, they may choose to file a debt collection lawsuit against your joint account holder or co-signer. Depending on the laws in their state, the creditor may be able to obtain a wage garnishment order if they win the lawsuit. So, it's important to understand the risks involved with joint accounts and co-signing before making any financial decisions.
How Can I Protect a Joint Holder if I File Chapter 7 or Chapter 13?
If you have a joint holder on your credit card account and you are unable to pay off the debt, your joint holder may face legal action and a decrease in their credit rating. But don't worry, there are options available to you.The joint holder can either pay off the debt in full or make the minimum monthly payments. However, if you are currently in bankruptcy, you cannot make credit card payments as they may be considered a preference. It's also not recommended to pay off the debt immediately before filing for bankruptcy, as that could also be seen as a preference.Once you receive your bankruptcy discharge, you can voluntarily resume payments on your credit card debt to protect your joint holder from liability and credit rating damage. This will help ensure that both you and your joint holder are able to move forward with a clean slate.
Talk with a Bankruptcy Lawyer Before You File Chapter 7 or Chapter 13
Although this is just a brief introduction, there may be other factors to consider in your specific situation. Therefore, it is always a good idea to consult a bankruptcy lawyer before filing for bankruptcy relief.
If you need help finding a bankruptcy lawyer in your area, we can assist you. We have a network of bankruptcy attorneys who offer free consultations, so you won't have to pay anything for your first appointment.