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Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1975
Experience:  Twelve years experience in all aspects of debtor & creditor BK.
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A debtor is a co-signor on a credit card with her husband.

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A debtor is a co-signor on a credit card with her husband. Even though the credit card is in both the debtor and husband's name, the debtor is the one who has been using the credit card and paying the monthly payments on it. The debtor defaulted the credit card, and now the creditor is garnishing her checks. The debtor is going to file Chapter 7 to stop garnishments. After the credit card is discharged in the debtor's bankruptcy, can the creditor pursue the husband? The husband would like to avoid bankruptcy. Is there anything he can do to remove his name from the credit card?
Thank you for your question. Sorry to hear about the situation though.

You say "co-signor", so that implies a contract, and what's in writing will control. We look to the contract first and often don't need to go any further.

Loopholes? Well, the most often used one works in FAVOR of joint financial liability:
In community property states, as well as a few others (it would take probably at least an hour to research that), both spouses are liable for each other's credit card debts on the theory that the money received in loan (that's what it really is, even though usually done in the form of goods and services) provided a financial benefit to the "marital community" or the "marital estate". In other terms, the stuff bought on credit by the one spared the other from spending that amount of money on stuff that they both enjoyed, or even if the goods were used by only the debtor spouse. This is because there *can* still be a conclusion that spending credit money on yourself left more of the other spouse's money available to the marriage by reducing the amount that the other one had to spend on you.

There IS a doctrine in most, if not all, states concerning "dissipation of marital assets" which allows for unequal division of debts and/or unequal division of assets to equalize the effect on debts, based on the "you spent it all on yourself" theory. This usually requires huge expenditures (especially in comparison to total household income) on near-worthless or short-pleasure or even illegal things like expensive solo vacations, expensive meals not shared with the spouse, expensive recreation or recreational items, or especially gambling or drugs.

The problem is, divorce decree debt and property division is enforceable ONLY between the former spouses. The creditor was NOT involved in the court battle and therefore had no chance to challenge the allocation of debts to make only ONE person liable when they thought BOTH would be liable when they lent the money. That would be unfair on a Constitutional level.

Now, sometimes, the dissipation type argument might work against a creditor, and maybe even with the couple still being married. But it's a hard argument to win. See the first comment above about the contract.

Removing a name from a credit card, as in no longer being an authorized user, is easy. Removing the name from liability on the debt, even on a credit report, is nearly impossible without some agreed settlement that does that. People manage to negotiate great deals all the time in this great land, but predicting the outcome is hard because everyone's facts are different, including the mood of the creditor's person with settlement authority.

Thank you.

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