Can I Have A Credit Card Authorized User Under Chapter 7 Bankruptcy?

The number of bankruptcies has been increasing dramatically in the last century. Approximately, 500,000 people file for chapter 7 bankruptcy every year. In recent years, the vast majority of filings have been by individual consumers rather than by businesses.

Because more individuals are filing for chapter 7 bankruptcy, a joint account holder or authorized user on your credit card could do so too. Learn about the differences between a joint account vs. an authorized user as well as the implications that chapter 7 bankruptcy can have on either type of account.

Difference Between a Credit Card Authorized User and a Joint Account Holder

A credit card authorized user cannot make changes to your account and is not obliged to make payments. Your issuer will send the card to the authorized user to use it as needed. Even though they can use your credit card, they cannot, and are not required to pay your bills in the event that you can't.

On the other hand, a joint account holder assumes equal responsibility to the original card holder. They can make changes to the account and are obliged to pay bills if you are not able to.

What if an Authorized User Declared Bankruptcy in the Past?

The great news is, your credit score will not be affected by the previous bankruptcy filing of an authorized user. Their past actions do not affect your current score. But it is wise to find out why they declared bankruptcy. If the reason is the accumulation of debt, you may want to consider whether it is wise for you to be sharing your credit card with them.

What Happens if an Authorized User Declares Bankruptcy While on Your Account?

You will not be affected should an authorized user on your account decide to declare chapter 7 bankruptcy. Your credit history is completely different from theirs and your credit history only includes the accounts and public records that were in your name.

What Happens to an Authorized User if the Account Holder Declares Bankruptcy?

Sometimes parents add their children to their credit card accounts as authorized users. If the parent decides to declare bankruptcy, the child's credit will not be affected because they are not responsible for the debts. But before filing for bankruptcy, it would be wise to do the following:

• Remove the name of anyone on your account before the bankruptcy case. This will ensure that the credit reporting agencies have time to update their records.
• One month before the case, remove anyone that is in an authorized user. Incorrectly reporting the nature and status of an account has been identified as one of the mistakes that credit reporting agencies often make. So you need to ensure this is done weeks before filing for bankruptcy.

What Happens if a Joint Account Holder Declares Bankruptcy?

One disadvantage of using a joint account is that if your joint account holder files for bankruptcy, your account will also be included in the proceedings.

If a joint account holder has decided on filing for chapter 7, there are two things you can do:

• Talk to the Issuer: Find out if the issuer can remove the account holder from the agreement. There are issuers who have no problem granting this request. If they agree, you can avoid the impact bankruptcy will have on your credit score.
• Close the Account: You can simply opt to close the account before the joint account holder files for bankruptcy. Closing your account could have a negative impact on your credit score, but it could even be more serious if it is included in the bankruptcy case.

It is advisable to avoid sharing accounts with anyone. But if you must share, choose an authorized user account. They may incur expenses on the card, but when they need to file for chapter 7 bankruptcy, your credit score will not be affected.