If you’re thinking about filing Chapter 7 bankruptcy, one of the most common questions I hear is:

“I’m only an authorized user on my parent’s, spouse’s, or relative’s credit card. Will filing bankruptcy hurt their credit?”

The good news is that in most cases, the answer is no.

As a bankruptcy attorney who has helped thousands of Michigan families obtain a fresh financial start, I often reassure clients that being an authorized user is very different from being a joint account holder or co-borrower. Understanding that distinction is important.

What Is an Authorized User?

An authorized user is someone who has permission to use another person’s credit card account.

The primary cardholder owns the account, is responsible for making the payments, and entered into the contract with the credit card company.

An authorized user may receive a card with their name on it and may make purchases, but they generally did not sign the credit agreement and are not legally obligated to repay the debt.

That distinction is critical in bankruptcy.

Am I Personally Liable for the Debt?

In most situations, no.

Unless you signed the original credit agreement as a joint account holder, co-applicant, or guarantor, you typically have no legal obligation to repay the balance.

Since bankruptcy only discharges your personal legal obligations, there is generally nothing to discharge regarding an account where you are merely an authorized user.

Does the Credit Card Need to Be Listed in My Bankruptcy?

This question surprises many people.

A bankruptcy petition requires debtors to list all creditors to whom they owe money.

If you are only an authorized user and have no legal liability on the account, then the credit card company is generally not your creditor. The debt belongs solely to the primary cardholder.

Because of that, many bankruptcy attorneys do not list an authorized-user account as one of the debtor’s liabilities because the debtor simply does not owe the debt.

However, every situation is unique.

Occasionally, a credit report may incorrectly report an authorized-user account as though the individual is liable for the balance. If there is any uncertainty about how the account was opened or how it is being reported, your bankruptcy attorney should carefully review the account documentation before filing.

Can the Credit Reporting Agencies Report That I Filed Bankruptcy on My Relative’s Account?

Credit reporting agencies are required by the Fair Credit Reporting Act (FCRA) to report information that is true, accurate, and complete.

If you are merely an authorized user and are not legally liable for the account, then reporting that your bankruptcy discharged that account would generally be inaccurate.

The bankruptcy discharged your debts, not someone else’s.

Credit reporting agencies should not report that a primary cardholder’s account was included in your bankruptcy if you never had legal responsibility for that debt.

Will My Relative’s Credit Score Be Hurt?

Generally, no.

Your bankruptcy filing should not appear on your relative’s credit report simply because you were an authorized user on their account.

The primary cardholder’s credit history should continue to reflect:

• Their payment history
• Their credit utilization
• Their account age
• Their own legal responsibility for the account

Your bankruptcy is your legal proceeding, not theirs.

As long as the primary cardholder continues making timely payments, their account should continue reporting normally.

Could the Credit Card Company Remove Me as an Authorized User?

Yes.

Many credit card companies have internal policies that automatically remove an authorized user after learning that the authorized user has filed bankruptcy.

This is usually a business decision made by the lender rather than a legal requirement.

If that happens, the primary cardholder can often request that the issuer add the authorized user back after the bankruptcy is completed, although each credit card company has its own policies.

What If the Credit Report Is Incorrect?

Unfortunately, mistakes happen.

Sometimes a credit bureau may incorrectly report that an authorized-user account was discharged in bankruptcy or otherwise associate your bankruptcy with the primary cardholder’s account.

If that occurs, the error should be disputed promptly.

Under the Fair Credit Reporting Act, consumers have the right to dispute inaccurate information, and credit reporting agencies are required to investigate and correct information that cannot be verified as accurate.

Don’t Confuse an Authorized User with a Joint Account

This is where many people get into trouble.

If you are a:

• Joint account holder
• Joint applicant
• Co-borrower
• Guarantor
• Co-signer

then you are legally liable for the debt.

In that situation, filing Chapter 7 may discharge your obligation, but the other person generally remains fully responsible for the balance. The creditor may continue collecting from the non-filing co-obligor.

That is very different from being an authorized user.

My Advice

Before filing bankruptcy, I always review every credit card account carefully with my clients.

It is important to determine whether an account is:

• An authorized-user account,
• A joint account,
• A co-signed account, or
• An individual account.

That distinction can affect how the account is treated in bankruptcy and help avoid unnecessary confusion after the case is filed.

Most people are pleasantly surprised to learn that simply being an authorized user on a relative’s credit card usually has little or no effect on that relative’s credit report when they file Chapter 7 bankruptcy.

Every case is different, however, and careful review of the account documents before filing is always the best approach.

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Attorney Walter Metzen

If you’re considering Chapter 7 bankruptcy and have questions about authorized-user accounts, joint credit cards, or how bankruptcy may affect your family members, I’m happy to review your credit report and explain exactly how each account should be treated before your case is filed.

A little planning before filing can prevent unnecessary surprises afterward and help ensure that both your fresh start—and your family’s credit—are protected.