Kids aren't responsible for parents' old debts

Collectors may say otherwise, but kids don't have to pay their parents debts

By Erica Sandberg

Opening Credits

Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com. Ask a question. 'Opening Credits' stories

Dear Opening Credits,
When I was 15 years old, my parents put me into a private school for a year. It was not voluntary on my part at all; it was only at the wishes of my parents. My parents never paid the remaining balance of $6,540 to the facility, and as soon as I turned 18, the debt showed up on my credit report. Can I be held responsible for this debt? -- Rachael

Dear Rachael,
Your letter makes me sad and angry. I can't imagine what led your parents to enroll you in any type of institution -- be it a pseudo-military operation in the desert or a hoity-toity boarding school in Connecticut -- against your will. Whatever the case, it doesn't sound like things were going swimmingly at home, so I hope the education and experience were positive in the end.

To set the record straight about that bill, though, I don't believe that you owe $6,540. Unless you willingly signed a contract agreeing to assume the payments at some point after turning 18, the debt was not, is not and will not ever be yours.

I understand that the liability is being reported on your credit files, and I can only speculate why this is happening. The backstory probably went something like this: After you left or graduated, the school sent your parents a bill for the remaining room, board, tuition, and whatnot. For some reason, they did not pay. Then, after a number of attempts, they either began reporting the delinquency to the credit bureaus or -- more likely -- sold it to a collection agency at a discount.

If the debt was sold, I can see how the collection agency could have made a mistake. Seeing your name on the paperwork it received from the school, they could have thought you were the one to pursue. 

Nonetheless, because the bill is not yours, all evidence of it needs to be removed from your credit history as soon as possible. Who has to take the time and trouble to make sure this happens? I'm afraid that would be you, Rachael. But don't worry, this shouldn't be too laborious. Here's what to do:

1. Check your reports from all three major credit bureaus to see exactly how and by whom the debt is being reported. You can get a free credit report from each of the bureaus once a year.
2. Dispute the credit report error online or via snail mail. Indicate the incorrect information, explain why it's false, and request it be deleted from your report. The bureaus will then investigate your claim within 30 days.
3. Contact whoever is reporting the misinformation and explain that you were a minor when you were enrolled, and you never agreed to pay the bills when you reached adulthood. Tell them you are disputing the matter with the bureaus, but in the meantime, you want them to stop reporting the debt on your file.

Once the investigation is conducted, the credit bureau should find that you are indeed not liable for the debt and then purge all evidence of the ugly business from your history. Because your situation is pretty cut and dried -- and the law regarding minors and contracts is clear -- I doubt you'll have much trouble.

Now, if it does become a problem, you'll have to fight it some more. Ask the school for documentation that includes the name on any financial agreements. If they are reporting the erroneous information, demand they cease that action immediately. And if you're dealing with a collector, send them copies of that paperwork, then restart the dispute process.

But that's you. What about your parents? It sounds like there is a legitimate bill from the school and if they signed you up, then they need to take care of it. Do you want to speak to your mom and dad about the debt and the problem they've caused you? That's one question I can't answer.

See related: 5 tactics of bad debt collectors, How to dispute credit report errors, Who is liable for a minor's debts?

Erica Sandberg's articles and insight are featured in such publications as the Wall Street Journal, Pregnancy, Babytalk, Redbook, Bank Investment Consultant, Prosper.com, MSNMoney.com, and Smartmoney.com. An active television and radio commentator, Erica is the credit and money management expert for San Francisco’s KRON-TV, a frequent guest on Forbes Video Network, Fox Business News, Businessweek-TV, and all Bay Area networks. Prior to launching her own reporting and consulting business, she was affiliated with Consumer Credit Counseling Services of San Francisco where she counseled individuals, conducted educational workshops, and led the media relations department. Erica is a member of the Society of American Business Editors and Writers, and on the advisory committee for Project Money.

Send your question to Erica.

Published: September 29, 2010

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