Expert: Christine Janklow - 6/20/2007

Question
Dear Christine,
I opennd an LLC with a partner 2 years ago. During that time, my partner
applied for a company credit card through the same bank which we kept our
bank account at (Bank Of America). The credit card company or the bank
never reached out to me, nor did I agree or sign anything saying that I would
be a second guarantor on the credit card. I figured that my partner was taking
the credit card out based on his own credit. My partner did put me down to
recieve a second credit card in my name, which I used maybe twice for
business mail purposes. Fast forward two years from then, and the company
has gone down hill. Aside from not making any income, my partner started to
use the credit card for his own personal purposes. I noticed that our bank
account was overdrawn, and that he had amounted 18K worth of credit card
debt. I took it upon myself to pay the overdrawn bank account and close it. I
also called the credit card company and asked them if I have any
responsibility to the credit card. Initially the rep told me no.  Just to be sure, I
had a letter of indemnification signed by may partner to insure that he is the
sole responsibilty of the debt. He does not argue this point. Here is the
problem. Now that the creditc card account has been sent into collections,
they are calling me to pay for it. The collections is saying that I am listed as a
2nd guarantor. I called the credit card company, and they too are listing me
as a second guarantor.  But neither the collections nor the credit card
company can bring up the original application which I have requested, which
would show me as signing up as a second guarantor. The bank is telling me
that whenter I signed up on that application as a second guarantor, or my
parnter signed me up without me knowing, or I am not even on that form,
that I am still personally responsible for the credit card debt, since I was a
50% partner in the company. Is this true? Am I responsible for a credit card
that I never signed up for? How can I demand a copy of that initial application
to show that I never signed up for it? I do not want my credit rating to be
affected by this, as I have perfect credit, and would want to keep it that way. I
understand that the company may be responible for that debt, and my
partner for being the primary guarantor, but if I never signed up as a second
guarantor, can I be personally responsible? The company is officially closed.
Any advice?
Sincerely,
G Green

Answer
Dear G.Green:
Thank you for your inquiry. Your situation is quite common but no less unfortunate than an individual who has suffered fraudulent use of his credit information. It appears that the debt may be quite old, and has likely been sold to a collection agency for pennies on the dollar and "charged off" by the original creditor. That said, the agency who purchased the debt received some basic contact information from the creditor including names of guarantors and additional card holders. Because your business has closed, you may not be receiving written notices sent by the collection agency as required by law. Therefore, it may have been impossible for them to get any response from you or your partner without the need to pick up the phone. If they did not reach him, then they will dial the next best contact which is you. They are telling you this is your responsibility because you were an authorized card user on the account, but mostly because they are looking to collect some money from ANYONE who had anything to do with this account. This is their primary motivation and how they can realize a return on their investment. Imagine that they might have purchased old debt written off by the creditor for $.10 on the dollar, and were able to collect 80% - 100% of the balance owed from you, nice profit right? The agencies will tell you nearly anything to scare you into thinking this is your responsibility. You need to begin exploring your liability by sending them a letter (send  certified/ return receipt) requesting that they validate the debt and show you proof of co-signing as guarantor. You can also request that any and all communications be done in writing. You really need to have this discussion with your former partner and make him aware that you have no intention of being responsible for this. He has the choice of paying or settling the debt on his own or through a debt mediation firm. Also, I highly recommend that after your letter goes out, DO NOT speak with the creditors if they call you until you have an answer. They will continue to pursue you if they get a person on the phone to discuss the matter, which also may open up a new Statue of Limitations on the debt. As a precaution and to better understand your rights once you possess this information, you should consult with an Attorney in your area that specializes in the Fair Debt Collections Practices Act (FDCPA.) You may be able to find one by visiting the website www.fair-debt-collection.com. I hope this answer provides a path towards resolving this matter. If you found it helpful, please take a moment to rate it so others may benefit as well.

Respectfully,
Christine Janklow