We are often presented with the following scenario:

One spouse applied for a credit card, and when asked “would you like a card for your spouse?” answered yes, so they received two credit cards on the same account. If the primary card holder files for bankruptcy in Ontario, is the supplementary card holder liable?

The answer: usually yes.

As I write this Hoyes Michalos bankruptcy blog article, I have in front of me a “pre-approved” credit card application. It already has my name on it; all I have to do is sign it, and I am pre-approved for a new credit card. At the bottom of the application is a space for me to write in the name of a supplementary card holder; if they sign it, they can have a card on my account.

The fine print on the back of the application reads as follows:

The card holder agrees “that the basic card holder will be liable for all charges incurred with the cards issued to the basic card holder and any supplementary card holders.”

Further, the card holders “agree that each supplementary card holder will be liable jointly and severally with the basic card holder for all charges incurred with the supplementary card issued to him/her.”

What does this mean?

Simply put, the primary card holder is responsible for all charges for both them and the supplementary card holder. In addition, at a minimum, the supplementary card holder is responsible for all charges they charge on their card.

In practice, we find that it is difficult for a credit card company to determine what charges were charged by someone on the card many months or years ago, so if one party does go bankrupt, the other party is usually held responsible.

The only exception, in some cases, is if the supplementary card holder never applied for the card, never signed for the card, and never used the card. In that case, they may have a chance of proving they are not responsible for the charges.

My advice? If you are going bankrupt, carefully review all of your credit cards to determine if anyone else may be responsible, so that you have a plan in place for dealing with them before you go bankrupt or file a consumer proposal.

This is a complicated area, so we encourage you to e-mail us and one of our associates can meet with you to review your credit cards and other debts and work out a plan to give you a fresh start.