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Unanticipated issues with shared credit cards in bankruptcy

Pennsylvania parents may find it prudent to provide for the emergency needs of a child going away to college by means of credit cards. However, it is important to recognize that the conditions of such a card could create problems for any party involved in its management or use. A bankruptcy on the part of one party, for example, could lead to collection action against another.

Although bankruptcy is not often thought of when a credit card is opened for a child, it is wise to think about the potential for such an outcome. There is a difference between adding a child as an authorized user to one's own account verses opening a joint account in both names. If a child is an authorized user, that name can be dropped from the account in the future. This is a simple solution for stopping collection action against that child if the parent becomes delinquent or files for bankruptcy.

If a joint account is established, however, a collection agency could seek payment from either party. If a child defaults on the account, the parent would be responsible. If the parent defaults, collection efforts could legitimately be made through a child who is a joint account holder. If a child has since married, such collection efforts cannot be carried out against the spouse. In fact, the account cannot even be discussed with that spouse. A parent facing bankruptcy could reaffirm such a debt in order to protect a child from collection action related to a joint account and could also pay that debt off in full to prevent collection activity from being a problem.

In addressing complicated accounts and concerns during bankruptcy, it may be wise to work with an attorney who has experience in this area. Legal advice may help a potential filer make decisions about debts needing to be reaffirmed.

Source:, "Shared card leads to collection mess after a bankruptcy ", Erica Sandberg, November 29, 2014

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Bryan P. Keenan & Associates, P.C.

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