Expert: Regan Shinski - 7/28/2010

Question
Hello, I'm a joint account holder on my father's credit card. He is the primary user on the account but I'm the only one who uses the card and the balance on it is fully mine. My dad will be filing Chapter 7 bankruptcy in the near future. I've heard that you could make an agreement with the creditor where they will remove the person filing bankruptcy from the account and change the joint account holder to primary account holder. I had the following 3 questions...

1. What usually happens to the primary card holder after they file bankruptcy if there is also a joint user? Am I correct to assume that the credit card company would remove him from the account and make me solely responsible for the payments?

2. I would like to takeover the card and be responsible for the account by myself. But I'm wondering if this is an agreement I would have to present to the creditors, or the bankruptcy attorney would have to work out with them, or something the creditor just arranges automatically and then notifies me of the change?

3. Could my dad's bankruptcy appear on my credit report if I take over payments of our credit card account? Would his bankruptcy have any effect on my credit score?

Thank you for your help!

Answer
Hi Jen:

The situation you are talking about depends on the creditor, timing, and to a certain degree, state laws.  An ideal situation is that the creditor puts the account in your name only and the card is NOT listed on your dad's bankruptcy.  This way, it's a clean cut and there is no risk of the bankruptcy reporting on your credit.

Whether or not the creditor even allows you to take over the account is up to them.  They may decide (unlikely) to take their chances in bankruptcy court.  They may make you re-apply or qualify on your own or they may have policies that do not allow them to alter the account.

If the account has already been listed in filed bankruptcy documents, it is not likely they will alter the account for fear of violating or skirting bankruptcy laws.

Your specific questions on how your credit could be affected or what would happen if you do nothing and it is listed in the bankruptcy really depends on the creditor and how it is filed.  I can't specifically answer with certainty other than the comments I made above.  Again, it would be best if you take over the account and it is not listed in court documents - meaning the switch is made before the filing.

Good luck, I hope this helps.

Regan