Expert: Michael Fay - 11/30/2010

Question
QUESTION: This is some background information.   I was trying to help a friend build his business so I agreed to be primary on the card for 6 months and then AMEX said depending on the payments and some other factors they would switch him to primary.  He made every payment on time until his company went through a healthcare audit, hence all payments stopped.  Within two months the balance on the account was 180K and he had no money to pay.  He close the doors for a month or so and borrowed 50K from family to pay something towards the balance - the balance is now $134K + 2.9% interest rate (each payment cycle the payment is late).  The calls started from AMEX and I explained to them the situation but because my credit was used to open the card even though it's a business account - AMEX  informed me  if payments are not made they will sue me, sell the account to a collection agency, and a judgment issued in my name and a lien place on my home.   

Understand I've never been late on a bill in my life literally so just to show a R9 on my credit report is killing me.  When I moved to Texas immediately after college I worked for the credit bureau so I truly understand the importance of credit.  At 21 I was working 2 jobs for 3 years just to payoff student loans and credit cards debt from college.  Now at age 41 I have bad credit this is the most stressful experience ever - to suffer because of someone else debt.    I know like most people would ask “why would you put your credit in jeopardy?”  I was trying to help a friend whom I thought had the reserve to cover the expenses,  and prior to the audit he was able to make the 60K and 70K  payments without a problem -  it was temporary.  

After explaining my case with  AMEX for days they agreed to a 6K per month (for the next 24 months)  payment which I can't afford, I don't make that kind of money. But that was the best they could offer given the balance.  The agreement states if you make these payments without being late and/ or no return payments we will reinstate the card once you complete the plan.  In the meantime they will show a charge-off on my credit report.   However, if you're late once we will immediately consider your account in default and proceed with further actions.  

My friend agreed to make the payment each month for 6K - the first payment was due in August 24, 2010 - he paid 3K and I had to cover the balance.  September 24th and October 24th he made the 6K payment.  Since, the October payment he said his attorney states he is not legally obigated to pay. He changed his phone# and will not respond to any emails. I had AMEX draft the Nov pmt from the same acct he normally pays from hopefully it clears.  At this point I don't know what to do,  its very frustrating to attempt to reachto a person or to make sure they will make the payment but with no guarantee.   I know the business is up & running and he's receiving payments.  I'm unaware of the audit outcome but he said the government owed him for $280K on the claims that were denied for lack of information.

Last thing I work for Bank  as an Accountant -  I think filing bankrupt would lead to my termination.  Just the affects this could have on my career and my livelihood is damaging in my view. Do you have any helpful information?

ANSWER: Dear Yasma,
While I do not know the particulars around the case, I believe that the attorney is WRONG!  (and a dirtbag for even suggesting this although he or she probably believes that they were acting in the best interests of the client)  Moreover, if this person really is a friend, they would do the right thing.  

Now that I have that off my chest, do you have any of the original agreements in writing?  The ones where you were “trying to help a friend build his business so I agreed to be primary on the card for 6 months and then AMEX said depending on the payments and some other factors they would switch him to primary”?

If the answer is yes, then the problem should be easily resolved by documenting that your obligations ceased at the 6-month window.
If the answer is no, then you need to get an attorney and place liens on your friend AND his business.

I’m sorry that I don’t have any more advice; this is a situation for which you will likely require an attorney to resolve.

Speaking of attorney, I would contact the human resources department at your bank.  I do not believe that it is legal to terminate you for filing bankruptcy.  They are required to keep your discussions in confidence....Although I would still begin the conversation by asking them if what you discuss is confidential.  By approaching them early and asking about options, you can answer the question about the security of your job and hopefully reduce some of the stress I’m sure you are under.  

Best of luck,
Michael


---------- FOLLOW-UP ----------

QUESTION: Thanks for the information!  One additional question have you heard of consumers writing a letter to the credit bureau that can be attached to your credit file?  A friend advised me to send one in but I never heard of that...

Can I report this on his business credit with D&B?

Answer
Dear Yasma,

You probably cannot report the bad debt to D&B.  The reason is that they do not accept unsolicited credit reports.  The exception to this is if you HIRE them to collect the debt.

I have heard that you can submit a letter to the bureaus, but you need to remember that there are three bureaus so you will need to send one to each.  I will be honest and tell you that have read thousands of reports and have never seen a full note from the consumer.  You will need to check and see what limits they place on what you can submit.  I suspect that there is a limit on the number of characters allowed.  I also don’t know which bureaus allow them or what limits they place on the letters.

This option can certainly help.

Best of luck,
Michael