Sharing a roof with a parent doesn't mean sharing their bankruptcy

Question for the expert

Dear Credit Score Report,
My 81-year-old mother is planning on filing for bankruptcy, as she is no longer able to make the minimum payments on her credit cards. Since we live at the same address, is there any chance her bankruptcy will affect my credit? I have requested a "second card" on my account in her name to cover her expenses. Will this come back to bite me? -- Sherry

Answer for the expert

Hey Sherry,
Sharing both an address and a credit card with your mother doesn't mean you'll both feel the impact of her bankruptcy, experts say.    

Bankruptcies are among the three types of public records (along with civil judgments and tax liens) that can appear on a consumer's credit report. Although you live under the same roof, you and your mother each have your own individual credit histories, with her financial problems likely only appearing on her credit report. A mother's "filing bankruptcy has nothing to do with the daughter who is living at the same address," says Carmen Deluttri, a consumer attorney practitioner with the Dellutri Law Group in Fort Myers, Fla. Therefore, unless you co-signed on a joint credit card account, her bankruptcy shouldn't impact your credit.

In your situation, it sounds like your mother is simply an authorized user on your account. So although your credit should be fine, your mother can expect some fallout. Once she declares bankruptcy and the court reports it to the credit bureaus, that bankruptcy will be listed on her credit report. Additionally, any of her accounts specifically covered by that liquidation will have their report status updated to show "included in bankruptcy," credit bureau Experian says.  That means your mother needs to consider what accounts she lists on her bankruptcy filing.

As you and your mother most likely realize, bankruptcy seriously damages a borrower's credit. Data unveiled by FICO in 2009 showed the credit score impact of common borrowing mistakes and problems. Among those errors, bankruptcy was the most damaging, lowering a borrower's FICO score by up to 240 points. Once a cardholder's FICO score takes such a plunge, he or she can expect any future borrowing to become significantly more costly and difficult.     

Still, as I noted earlier, your credit score doesn't have to drop even if your mother's FICO falls: Continue to make all your bill payments on time and in full, if at all possible, and take on new debt only when necessary. You'll also want to be sure that any charges your mother puts on that second credit card get repaid. If she does run into trouble, having her listed on the account as an authorized user -- rather than opening a joint account -- means she can be removed from that card at any time. Otherwise, "if the mother and adult child have any joint credit, there will be an impact," on both of your credit, says Equifax spokesman Tim Klein. 

In addition to avoiding your own mistakes, you'll need to be on the lookout for other mix-ups that may occur along the way. Deluttri recommends requesting a copy of your credit report sometime before your mother's bankruptcy filing and then again three or four months after she declares bankruptcy. Scanning those reports will enable you to catch any mistakes that could erroneously appear and unfairly damage your credit score. If the shared card "account were to be shown inadvertently as included in bankruptcy on the child's credit report, he or she can dispute it and Experian will remove it," says Rod Griffin, the bureau's director of public education. By also looking over your reports from the other two major credit bureaus, Equifax and TransUnion, both before and after the bankruptcy, you can also dispute any errors in those reports. 

By continuing to consider the close links between your personal finances, you're sure to make future decisions that will positively impact both you and your mother's lives.

Good luck.

-- Jeremy

See related: Consider these options before co-signing for a card, Cardholders' mistakes can bring down authorized users' credit score, FICO reveals how common credit mistakes affect scores, Free credit reports: How to get the actual free one, Decade-old credit mistakes shouldn't appear on your report

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Updated: 12-11-2018