Options limited if authorized user refuses to pay charges

Daughter adds dad to her card, then he leaves her with $20,000 in debt

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 CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.

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Question Dear To Her Credit,
About seven years ago, my father asked me to open an AmEx card and put him as an authorized user. We became estranged a bit later and haven't spoken in over five years.

Over the years, I've attempted to restrict his use. He communicated through his wife that if I closed the card, he would stop making payments. The debt at this point was over $20,000, and because I could not afford even the minimum payments, I was trapped.

About a month ago, he stopped making payments anyway. I closed the card because I didn't know what else to do. The payment is now almost 30 days late, and I can't afford this debt. Is there anything at all that you could advise me to do? He lives in New Jersey and I live in New York, and he won't return my calls.

I've never used my card -- all charges since the inception of the account have been on his card. I know it was a mistake to open the card, but I was young and this was my dad. Please advise! -- Victoria


Dear Victoria,
The credit card company will hold you responsible for this debt, even though you did not benefit from it and you never used the account. You authorized use of your card, so no fraud was involved.

The police won't be of much help, either. You can't claim identity theft, or any kind of theft, when you authorized him and knew he was using the card.

If you could afford to pay the debt, one option would be to give up and just take a tax deduction for the $20,000. You must show you had an actual debt and that you tried but failed to collect on it. You can then take a bad debt deduction as a capital loss for the year in which the debt became worthless. You say you can't afford to pay, however, so that's not much help in your case.

If you want to sue your dad for payment, you need all the documentation and evidence you can find. He apparently never signed any note saying he would pay you back. Did he or his wife send you mail or email in any way admitting that he owed the money, or showing that they used duress to force you to keep him as an authorized user? Do you have any witnesses who can attest to the fact that you were not letting him use the card out of the goodness of your heart?

You can choose between small claims court and municipal court for collecting on a debt. Small claims court would hardly be worth the trouble. In New York, the limit is $3,000 or $5,000, depending on the jurisdiction.

To bring a case in municipal court, you'll need qualified legal help, which can be expensive. You may be able to find low-cost legal help in your area, or a lawyer who can work with you based on your ability to pay.

If you win your case, that doesn't automatically mean you get the money from your father. Sometimes, winning a case only means [%Link?type=article&id=7675&text="you have a judgment"%] against someone. Getting the money is another battle. You may be able to garnish your dad's income or assets, or you may have to attach real estate, for example, and wait until he sells it. A lawyer in your state can tell you about your options and chances of actually collecting the money.

If you're reluctant to sue your father -- and who wouldn't be -- you're left with two options. Pay the debt or try to avoid responsibility for it, either temporarily or permanently.

Consider paying the debt by selling something, working extra hours or getting a lower interest loan.

If you can't afford the payments under any circumstances and have no other way of paying the debt, you may want to negotiate the debt and settle for a lesser amount. Negotiating the debt will harm your credit history, so it's not ideal.

I hate to see you file for bankruptcy over $20,000, especially if that's your only debt. Depending on your income level and the rest of your financial situation, however, that may be one way out. It's sad, but many bankruptcies are caused by bad loans between family or friends. I hope you don't have to face bankruptcy at this point in your life, when you're working on a career, possibly buying a house and generally getting started.

It's hard to believe a father would treat his daughter this way. Unfortunately, I've seen it before. It's a painful lesson, but you are learning early in life to never let anyone, other than a trusted spouse, use your credit card. Good luck, and I hope you put this debt behind you as quickly as possible.

See related: Odds slim when suing authorized user for unpaid debt, Authorized user backfire hurts son's credit score

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Updated: 01-21-2019