Business credit cards and the individual bankruptcy case

30 Apr Business credit cards and the individual bankruptcy case

Small corporations may have their names on the shareholder’s credit card, but likely are not actually liable for the charges made on the card. Clients come with lists of “personal” credit cards and “business cards” for their corporation or LLC. In looking at bankruptcy options, we need to know which debts are those of the individual, which are those only of the corporation, and which are joint debts.

Without exception in my experience, there is no such thing as a credit card for which there is not a real, live person who is personally liable for the debt. The corporation’s name on the card is just there for image.

In some instances, the business corporation and the individual may be liable. As we explore bankruptcy options, it becomes important to know whether a credit card, discharged in the bankruptcy of the business owner, will have any legal rights against the corporation which may continue to operate. Often, neither the card issuer nor the individual can produce the card agreement from the inception of the card.

A client put me on to a neat way to find out if the card issuer contends it has a claim against the corporation: call the card issuer as the “new bookkeeper” of the corporation and ask for account information. The card issuer should only give that information out to the card holders, those entities who owe the debt.

My client reported back that the credit card company would not talk to the “new bookkeeper” of the corporation about the balance on a card that was imprinted with the name of a former partner and the corporation. The corporation was a stranger to the account, according to the card issuer.

Bingo! We now know that if the individual files bankruptcy, the surviving corporation will not be hounded to pay the credit card.

There’s more about separating the business from the shareholder on Bankruptcy in Brief.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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