Without co-signer, minor's debt likely off-limits to collectors

Opening Credits columnist Eric Sandberg
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.

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Question for the CreditCards.com expert

Dear Opening Credits,
When I was 17, I got a credit card from a reputable Arizona bank that knew I was a minor. When I could not make the payments, my account was sent to collections. I tried to do the responsible thing and make the payments. The collections office required access to my bank accounts so they could take out money whenever they wanted. As of six months ago, they refused payments and would not answer my calls or letters. Now they are attempting to garnish my wages and tack on more lawyers and court fees. Can they do this? I've done everything I can to make payments and now have a court hearing scheduled.  -- Brad

Answer for the CreditCards.com expert

Dear Brad,
Hmmmmm, a few things about your letter don't sound right.

Assuming the Arizona bank that gave you a credit card is as reputable as you say, then they would not have issued you a credit card without an adult acting as co-signer. Did someone -- a parent, uncle, older sibling, anyone -- help you get the account? If so, the financial institution did nothing wrong in providing you with the card.

Now, if the bank did provide you with a credit card when you were a minor without an adult's guaranteeing signature, then there is a chance that you can escape paying for what you charged, as well as this whole legal mess. To find out, contact the initial issuing bank and request the original application. With some research, they should be able to pull up those facts.

If it turns out that only your name is on the paperwork, contact the collection agency with this information immediately. Though they aren't answering your calls, leave a message anyway and write them letter to back up your story. Explain (and provide proof) that you were under the age of 18 when the card was given to you, and no adult was accountable for the charges. The company may get your letter in time and just drop the entire affair. If not, bring the information with you to court -- which means you better get right on this task.

Conversely, if you find that there is someone else's name on the paperwork, the collection agency has every right to take legal action. However, it should be the co-signer, not you, who is sued for the debt. You could point this out to them now or wait until you get to court, but it would be kind of a crummy thing to do to someone who helped you get the card in the first place.

That said, another fact about your situation also sounds peculiar: Why would a collection agency that had been accepting steady payments straight from your bank account suddenly stop and decide to sue?

I'll deduce that at some point you didn't have enough funds in your account to cover the agreed-upon installment payment. Frankly, that's the only reason I can imagine that they would pull the rug out from under you. You see, third-party collectors are not in the business of extending credit; they are in the business of collecting money. If there wasn't enough in the account when they went to claim it, the deal was rescinded. Now they want all of the cash -- thus the lawsuit.

Though you have a scheduled court hearing, you can still contact the collection agency and pay off the remaining debt. Do so and you and any co-signer may be able to avoid a judgment.

Whatever you do, make sure you attend your court hearing. If you don't, you'll lose the case by default. At that point, either you or the co-signer will be held responsible for the remaining balance as well as all sorts of lawyer's fees and court costs. More, the judgment creditors will be able to do pretty much whatever they are allowed to do -- including a wage garnishment, if permitted in your state -- to collect.

So go and have your day in court. You may even get a break. If your installment payments were, in fact, steady and the collector is just being difficult, the judge may allow you to make stipulated payments and keep the problem off of the credit reports of all concerned.

See related: Minors may bear moral, but not legal, responsibility for paying off debts, Collectors can try, but can't legally collect, minor's debts, What wage garnishment is and how it works, Stipulated payments: the secret savior

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Updated: 01-17-2018