Ex-business partner’s suing me for card debt I’m authorized user on – what to do?

First step – see if any paperwork you have from the business formation addresses how the debts would be handled


Authorized users are generally not liable for any debt on the card. However, if the debt was part of a business partnership, other rules might apply.

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Dear Your Business Credit,

I started a business (online clothing) with a friend, stupidly using an oral agreement. She left the business and left me stuck with all of the inventory and now the business is failing.

She took out a credit card in her name and put me as an authorized user (not responsible for the debt).

I have paid $3,600 of the $8,355 balance and she is now suing me for $7,800. She is responsible for this bill and at least half of the business. This does not seem fair for her to do this.

What is or would be the outcome? I know it could go either way and I’m aware of this. I feel I paid almost half and even if she left the business she should be half responsible. – Cynthia

Dear Cynthia,

You’re not alone in starting a business without a written partnership agreement.

Many people go into business with friends without formalizing the arrangement, reasoning that the bond of friendship is all they need. Unfortunately, when money comes into the picture, relationships sometimes change.

Check out all the answers from our credit card experts.

Ask Elaine a question.

See related: Former business partner misused card debt as an authorized user; what can I do?

How to handle partnership’s card debt

Although you say you didn’t set up a written partnership agreement with your friend, it isn’t clear if you set up a formal business entity such as an LLC or corporation with them. Generally, you’d need to have done so to open a bank account for the business.

If you formed an LLC, you may have set up an operating agreement at the time that addressed how debts would be handled.

If you registered as an S Corp with your state, you might also have filed articles of incorporation or bylaws with the state that covered how debts will be handled.

In either case, look back at any paperwork you have from the business formation to see if you did, in fact, address how the debts would be handled.

Seek legal advice

What if everything in the business was completely informal? It appears at first glance that the credit card issuer is likely to pursue your business partner for the debt, given that she took out a credit card in her name and you were merely the authorized user.

However, you do mention your partner is suing you to recover the debt. If she has gone beyond the stage of threatening to do this and actually gone ahead and filed the suit against you, take a look at the grounds for the suit.

Is she citing laws in place in your locality that govern how debts are covered in a business partnership where no formal agreement is in place? There could be some laws that govern the situation. If so, I would highly recommend you find an attorney familiar with the laws of your state to represent you, so your rights are protected.

I realize this is a tough situation. Given that you have been stuck with all of the inventory, perhaps there is a way you can sell some of it to defray the credit card bill. It may not cover all of the charges, but it could lessen the financial pain a bit. Good luck!

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