Chapter 13 and Co-Signer

[becky0907]

Hi all! I am new here and am happy to have found this website. My husband and I filed for Chapter 13 on 9/1/10. He has a Fifth-Third credit card that has been open since he was a teenager. His dad is a co-signer. The credit card is paid in full and our attorney told us that it was fine not to include them since there was not a balance. On his credit, the account was closed last week by the grantor and listed as "included in bankruptcy." When my husband called, the bank said there was nothing they could do about it and to write a letter to their internal credit reporting department.

My question is first and foremost, how will this affect my father-in-laws credit and second the process for getting this removed. I have called my attorney about this but haven't received a call back. It doesn't matter to me that it's on our credit since it's already poor but my father-in-law has nothing to do with this and the account is paid in full.

Anyone had something similar happen? Any advice you can give me?

Thanks!
Becky

[NoTomatoCan]

Pretty typical that they would close the account, even with a zero balance. Very few credit card accounts (even if not included) make it through a BK.

As for how it would impact your FIL's credit... It is sort of unclear when you say "On his credit" whether you mean your husband or your FIL. Do you know for certain that it says "Included in Bankruptcy" (IIB) on FIL's credit report? It might say that on your husband's and just have the genric "Closed by issuer" on FIL's (worth verifying). If it does have IIB for your FIL's credit report than he could always challenge it via the credit bureau or go the route the bank suggested. The problem is that it is actually sort of accurate... The account was closed becaue one of the co-signers filed BK. However, if your FIL challenges it via the credit bureau stating that it is inaccurate and he never declared BK (all true) then maybe he gets lucky. Worth a shot anyway. Also, if FIL has a current banking relationship with Fifth-Third it is possible he could leverage that to get it changed.

I am not one of those credit score junkies who knows the ins and outs of how everything you do impacts your score, but depending on your FIL's credit situation and the available credit on this card before it was closed there could be very little impact or there could be a lot. If FIL has great credit with several aged accounts and isn't "maxed out" on his ccs then the impact should be minimal. If he is highly leveraged and this card made is credit utilization look good because it was paid in full, the hit might be significant. Personally, my wife and I had a couple of accounts closed by the banks a couple years ago when the credit crisis hit. These accounts were paid in full. The impact on our credit was minimal. The biggest hit came that we went from about 50% available credit to less than 25% (so over 75% utilization of revolving accounts).

[lrprn]

Assuming that your FIL is indeed a co-signer equally responsible for the paying anything owed on the card, not just an authorized user....

My question is first and foremost, how will this affect my father-in-laws credit...

Since your FIL didn't file bk, it won't affect his credit score at all. Rarely an error by the credit agencies will occur and your FIL may be listed as filing bk because of his connection to the card. All your FIL has to do is dispute it and it will disappear off his credit report within 30 days like it never existed.

....and second the process for getting this removed.

Your husband filed, your FIL did not. The credit card has been cancelled for your husband, and that can't be reversed. Frankly whether your husband filed bk or not, the bank issuing the card can cancel it for just about any reason they want.

If your FIL is a co-signer, he should still be able to use the card, but your husband cannot. If your FIL is only an authorized user of the card, then your FIL won't be able to use the card again because the card 'owner' (your husband) filed and the card was cancelled by the issuing bank.

Your lawyer was correct - you don't have to list any credit card with a zero balance when you file. What he/she may not have shared with you is that any credit card issued to anyone filing bk will almost certainly be cancelled anyway. The major card lenders all upload data about who files into a shared database. Once the database gets word you filed on any cc, all of them are cancelled whether they have a balance or not. Very rarely a local cc or a dept store cc will survive filing and remain active, but it's unusual.

[becky0907]

Thanks so much for both of your replies! My FIL doesn't care that the card was closed. on my husbands credit the card is showing "included in bankruptcy" so we were worried that my father in laws credit would show the same notation. He didn't even remember the card existed until he bought a condo last year and pulled his credit. He has a near perfect credit score somewhere in the 800s and the card only had a 500 limit. If that score were to drop he would rightfully be very upset.

Thanks again!