Expert: Michelle Dunn - 3/1/2011

Question
QUESTION: Hello Ms Dunn,
My question is similar to one posed to Ms. Jenklow on 6/20/97, but it's a little more dicey.  In 2004, I created a small, home-based business with an associate.  We opened a business account and a business credit card together.  Although, I don't remember the specifics, I am told I was a co-guarantor.  In 2005, I resigned from the business.  We went to our bank (Bank of America)-- the same branch where we activated our card and checking account, to have my name and responsibility removed from everything.  We spoke with the business representative there.  I forfeited my checkbook and my credit card in that office.  We were told by the representative that all was taken care of.  We were given no other instructions.  Fast-forward five years later with absolutely no word from BoA since I resigned;  my personal line of credit was frozen.  Upon running a credit check to find out why, I found that the small business card has an unpaid balance of $13,000, and I am apparently still considered a co-guarantor on the card.  I found my old business partner.  She is now in bankruptcy and had stopped paying on the card  which she had been using for personal reasons since the month I left (as a result of my efforts, she is now back on a payment plan with them, but the original past due still exists and finance charges are accruing-- my credit is tanking ).  She too remembered being told clearly by the Bank rep that all was taken care of, and the accounts were hers.  I have spoken with several representative from BoA regarding this.  They cannot find a copy of the original agreement.  They say this is because it's over five years old, and it does not have to be on file on that time.  I really am not sure that I was a co-guarantor.  They also said that I was supposed to have requested to be removed from the card in writing-- this is in the written rules of use that they sent me a copy of.  So, at this point, I have two questions:
1.  As I went to my BoA branch in good faith to find out what to do, as I was verbally told all was taken care of and my ex-partner will attest to this, as they cannot find the original agreement, and as I never recieved any correspondence regarding this account since I resigned (all bills went to my ex-partner's addresses), do I have any recourse?
2.  I requested copies of all statements/communications since I left.  My name appeared on several statements and even under the business name on the envelopes.  My ex-partner never did anything or said anything about this but continued to use the business card for personal reasons without my knowledge or consent and certainly not to my benefit.  Do I have any recourse in this regard?

Thank you in advance for any advice you can offer.

ANSWER: Sally,

In order to be a co-guarantor, you would have signed an agreement to that effect. There is no other way to become a co-guarantor.   

When you resigned and went to the bank and "forfeited" your checkbook and credit card, that doesn't release you from any responsibility.  In order to be released from any responsibility you would have had to close out the checking account that was in both names and the owner would then open an individual business account in just their name.  Same with the credit card, you would have had to cancel the card that you had your name on and the new owner would apply for and get their own card in just their name and/or business name.  By not cancelling these accounts, you are still legally liable.

If you are not sure if you were a co-guarantor, this being on your credit should tell you that you are.  You should have copies of any paperwork you signed when you started your business, I would start there. Look through the contracts and agreements that you signed when starting the business, including the credit card application.  

To answer your questions:
1.  You will need your original copies of any paper work you signed opening the accounts and any paperwork you signed to close the accounts, it is up to you to prove you cancelled any accounts in your name or closed any accounts in your name.

2.  You say you requested copies of all statements/communications since you "left" - who did you request this from?  Once you cancel an account you can no longer receive any paperwork on it.  If you did not cancel the accounts but just removed your name, you may still be liable - but you would need to request a copy of the statement from the bank or credit card company, provided you are still listed on the account. If you are not, they cannot give you this information legally.
You can try to sue your business partner for the balance you are being told you owe but you will need copies of paperwork to prove your case.

You will need proof you cancelled any bank accounts or business accounts, including credit cards. If you did not do this in writing, you may end up having to pay this bill.  I would gather all of your paperwork in order to see what you may be legally liable for and go from there.


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

QUESTION: Thanks for responding-- I so appreciate it.  "Forfeit" may not have been the right word.  My name was removed from the business account, and one was reopened in my associate's  The reason we went to the bank together was to take whatever action needed to transfer sole responsibility to her on both accounts.  We would have taken whatever action we were advised to at that time.  The bank representative told us together that all was taken care of.  Had she told us to write a letter, make a phone call, etc.... I would have done so with my ex-partner in her office.  It sounds, though, as if you are telling me the bank representative bore no responsibility in this situation-- despite the fact that we signed up for the card at our branch and it was issued through this bank?   

Unfortunately for me,  I threw out all of the remaining paperwork relating to our business about two years ago.

Thanks again.

Answer
Sally,

When you say both accounts I am assuming you mean the bank account and the credit card account.

Two very different and separate things which would need to be handled individually.  Taking your name off the business account is the right thing to do at the bank.  With the credit card company you would have had to either call, write or visit them, cancel the card in both your names and your partner would then apply for a business card in just their name.

Most businesses apply for a business credit card through their bank, but the bank is not affiliated with that account or responsible. You would have been receiving credit card bills and statements once you had the card and if you look at them you will notice they did not come from your bank but from whoever you applied for the card through.

Unfortunately you are correct that if you have disposed of your paperwork, you will have to rely on either your ex-business partner, the bank and/or the credit card company to obtain any paperwork to uphold your case.