Post Bankruptcy: Business Credit Cards and Personal Liability - Westgate Law

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Post Bankruptcy: Business Credit Cards and Personal Liability

When an individual files for bankruptcy both personally and for their business, credit accounts for the business that had the spouse’s name listed will sometimes come back for payment on the debt post bankruptcy. They’ll get in touch with the spouse who did not file bankruptcy. In some cases, even though the debt was included in the list of creditors, discharged by the bankruptcy court, and shows up on BOTH spouse’s credit reports as a charge off balance, years later, the creditor can pop up asking for payment from the spouse who did not file for bankruptcy. They may even contact you through an attorney and attempt to take you to court to repay the debt. When a debt is discharged through an individual and business bankruptcy, can another individual whose name is also no the account be held liable for the debt years after the fact?

If this has happened to you, it can safely be assumed that the creditor feels you are responsible for the debt. To avoid being held liable you’ll need to prove otherwise. Receipt of a letter from an attorney stating you are liable and that the creditor is going to take you to court should be taken very seriously. Immediately take action if you are in receipt of such a letter to determine if you are actually being sued or if the creditor’s attorney is simply advising you that you will be sued unless you pay on the debt.

In many cases such as this, the attorney sending the letter is simply advising you that they are now handling the account and that they are considering taking legal action against you. If you are actually being sued, you receive official court documents stating that fact. In fact, you will be served the court documents if you have actually been sued.

If you have not actually been sued, you should immediately insist on being provided with validation of the debt in writing. You should demand that the attorney provide you with proof that you are personally liable for the debt being discussed. In most cases, this proof (if it exists) will come in the form of a signed contract. In many cases, individuals who receive this type of letter from an attorney insisting they are liable for an old debt that was discharged in a spouse’s bankruptcy years previous will discover that they are actually not personally liable.

Insisting on being provided with proof of liability is important because in many cases, the creditor is attempting to get payment from you as the “authorized user” on the account. As I’m sure you’re aware, there is a major difference between being liable for a debt and being an authorized user on a debt that was later charged off or discharged through bankruptcy. Being an authorized user is a specific situation that designates you as an individual that is able to use the credit, but that is not liable for the debt. Being an authorized user does not leave you personally liable for the debt – even if the individual or business that is liable declares bankruptcy and has the debt discharged.

When you are personally liable for a debt, you personally signed a contract or provided a verbal commitment to pay back the debt being accrued on the account. It doesn’t matter who used the card, it only matters who agreed to be responsible for the debt. If you don’t remember, demand that the attorney send you proof of liability because it’s most likely that you were added as an authorized user after the fact if you have no memory of the creation of the account with you listed as “liable.” It’s more probable that your husband called and added you as an authorized user at some point to give you access to using the card if necessary. Again, this type of action does not obligate you to pay back the debt.

It’s also important to consider the age of the debt. If a creditor attempts to obtain payment “years” after you thought it was taken care of, they may be outside of the statute of limitations. If so, the attorney would not be able to sue you for payment. Check with a bankruptcy attorney in your area if you think this might be the case as each state has different time periods restricting the amount of time a creditor has to sue for an unpaid debt. In most states, the law states that a consumer is legally liable for a debt for 4 years after the last time they used the credit account or made a payment towards the balance.

If you have actually been sued, you need to file an answer with the court confirming the same info discussed above. In many cases, individuals who dig deeper will find that they are being sued for a debt that they are not liable for or for a debt that is outside of the statute of limitations. The faster you respond to the suit the better so don’t ignore paperwork advising you of court proceedings. If you have actually been sued, you should quickly get in touch with an experienced attorney who can help you avoid wasted time and money in this type of court proceeding.

If you need assistance pinpointing your liability in relation to a debt discharged by bankruptcy call the southern California bankruptcy attorneys at Westgate Law.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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