Legal Question in Credit and Debt Law in Utah
Letting others use your credit
I let a friend use my credit cards to help them with their business to get over a hump. They have put over $80,000.00 on my credit cards in the past year making only minimum payments. My friends told me that they would only need my help for about 6 months.
One of the cards (my friend is a authorized user on the account) must be paid in full within 30 days each month. But it's been 5 months. I am now under collection from this card for $20,000.00. My friend has been making monthly good faith payments of $500.00. I guess the CC company's patience have run out. They have turned my account over to a collection agency.
What are my rights to buy some time, until they can come up with the $20K? What do I tell the pack of wolves at the collection agency? They are demanding payment in full now.
They have been paying minimum payments on the other cards at their expense (Including Interest). All the other cards are in good standing.
This was all done in good faith on my part. Is it to late to draw up a Promissory Note? I need to find a way to protect myself in case their business goes under. What steps do I need to take?
Thank you!
1 Answer from Attorneys
Re: Letting others use your credit
(1) You can satisfy the collection agency by making payments. Although they want all of the money, they will negotiate. You may threaten bankruptcy, which will get them to negotiate. Your other choice is to not pay, eventually your account will be forwarded to an attorney who will sue.
(2) The situation with your friends is not good. Try to get them to post some sort of collateral as security for the debt, hopefully some collateral which is not already pledged to someone else, or which has a lot of equity. Make sure that they sign for the business as well as personally. You should also stop their access to your credit cards.
(3) Note that you are ultimately liable for all of the credit card debt, including interest and late fees. Their delinquency is also going to affect your credit.
(4) If they go into default and file bankruptcy, your right to payment from them will be severely discounted, you may be considered an insider debt which may further limit your right to payment. If they file bankruptcy, your only protection is to have secured collateral, and then hope that you can foreclose against the collateral and keep the bankruptcy trustee from getting the collateral.
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