Question:   Regarding credit card laws: I co-signed for a credit card. Is there any way to get out of it? What if the other co-signer files bankruptcy?

Answer:      Before you ever agree to co-sign for a credit card, you should know the risk associated with the agreement.

Co-signing for another person is never a good idea, particularly for a friend or family member.

When you co-sign with someone, both of you enter into the exact same agreement with equal responsibility to the creditor. You are likewise both responsible for any activity that occurs on that particular account.

Credit card laws dictate that terms of the account agreement is equally applicable to both parties. So if something goes wrong and one signer does not meet his or her obligations, the other party is held equally liable.

Once you have co-signed on a credit card, you cannot simply request to be removed from the account later on.

The only way to escape a co-signed agreement is to payoff the debt. Once the debt is paid the account can be closed. If you desire to have an account in your name only, you will then need to reapply using only your personal financial information.

If the other co-signer disappears, under current credit card laws the credit card companies have every right to hold you accountable for the entire outstanding balance.

A worse case scenario is if the other co-signer files for credit card bankruptcy. Unfortunately, the bankruptcy will not eliminate your responsibility to pay back the entire debt. Bottom line, there is no easy way out of a co-signer’s liability. This is why we encourage readers never to co-sign for loans or credit cards.

Co-signing on credit card applications for a friend or family member immediately changes the relationship, and not in a good way. Once you are connected by money matters, you are tied to that person in a way that can create tension and barriers to the relationship.

You may think you are helping that individual by co-signing for them, but the truth is that if they cannot qualify for the loan on their own, what makes you think they will be able to make the payments on time? The risk in co-signing is huge. Don’t do it.

Also, your credit history report can be damaged greatly if for any reason payments are not made on time. If you don’t receive a copy of the monthly statement you may not be aware of a looming charge off or repossession until it’s way to late to remedy.

Credit card laws provide very little in the way of helping you to correct a poor credit report rating, so don’t put yourself in a position where someone else has influence over the quality of your credit history information.

The only way to minimize your risk is avoid co-signing altogether. If a person wants you to co-sign for them it usually means they cannot qualify on their own, or they have had financial issues in the past. Recognize these red flags!

Protect yourself and respectfully decline. This specifically includes family and friends. It may seem harsh to say no to ‘helping’ someone you love, but you must remember that nothing can destroy a relationship faster than money troubles.

Wish them well and focus on your own financial issues. Most people have enough debt to worry about without adding the pressures of another person’s debt on top of their own.

» Does it make sense to use gift credit cards so I earn award points, rebates or mileage?
Various gift credit cards, whether for cash rebates, mileage or points reward programs do not make using credit cards a good thing. The money, mileage or points earned will never be enough to justify the risk that in inherent to playing the credit card game.

» What’s the history of credit cards, and how do I distinguish between good debt and bad debt?
Debt is dumb, it should be avoided at all costs. Just look at the history of credit cards. Less than 50 years ago, it would have been shameful to buy on credit.

» Out of all the consumer debt solutions, is consumer credit counseling a good idea and are these agencies for real?
There are some agencies that provide good quality consumer debt solutions. Consumers can find a ton of helpful information here on our website.

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