Co-signed card leaves mom's credit in ruins

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question Dear Sally,
I recently found out that a store credit card I had my mother co-sign for was put under her Social Security number as the primary cardholder instead of me. This was never an issue until I was unable to keep paying my monthly payments due to illness and unemployment. It was eventually sent to a collection agency and she was contacted. I was unaware of the store’s mistake in putting my mom as the primary cardholder until one day when we were shopping.

This late credit card bill has affected my mother’s account negatively. I called the collection agency and told them I was the owner of the debt. She has not once used this card or account. I want this debt under my name only and her removed from all this mess. How can I achieve this?    -- Cheryl


Dear Cheryl,
It wouldn’t have made much difference if the store had called you the primary cardholder instead of your mother. The important thing is that she co-signed with you, which means she took 100 percent responsibility for the card balance if you did not pay. The store doesn’t care who used the card, or what was purchased with it. The store extended the credit for your purchases based on your mother’s financial information and good credit history.

Having your mom co-sign made it easy for you to get the card, but it’s a problem when you can’t pay. Because you have hit hard times with illness and unemployment, you may be a candidate for Chapter 7 or Chapter 13 bankruptcy, or negotiating the balances on your debts. However, with your mom’s signature on your card balance, the store would just move on to your mom and try to collect from her. If she doesn’t pay, her credit history and score will be damaged just as if she had opened a card she considered to be her own. As the interest fees and penalties pile on, the amount she owes will continue to go up.

In hindsight, people shouldn't co-sign any loans that they would be unable or unwilling to pay themselves. It was nice of your mother to help you, but it sounds like neither of you quite understood how co-signing really works. I wish I could offer a better answer for you.

If you can possibly scrape together the money to pay the bill, that’s the only way to get rid of it and spare your mother the consequences of this debt. If your health and earnings prospects have improved, perhaps you can start paying more on the debt to put it behind you as quickly as possible.

It’s important that you and your mom discuss this problem. She needs to understand, if she doesn’t already, that you can’t just have her removed from the card or the bill until the balance is paid off. She should also understand that if she doesn’t pay it, the unpaid bill will affect her credit the same way it would if she had spent the money herself. If she is in a position to do so, she may want to pay off the debt to stop penalties and interest from accruing, and to salvage her credit history. You could then make payments to her, instead of to the collection agency.

If you have many debts that you cannot resolve, please visit a credit counselor. I recommend finding a nonprofit agency affiliated with the National Foundation for Credit Counseling or the Financial Counseling Association of America. They can help you find the best way to resolve your debts and take control of your financial life.

See related: 4 questions to ask before you co-sign on a credit card, Primary accountholder, authorized user: There's a difference

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Updated: 02-22-2019