No one wants an employer involved in a personal financial issue, so it’s understandable that you’d want to know the consequences of including a business credit card in bankruptcy—especially since wiping out credit card debt is one of the main reasons people file.
The fate of your corporate card—and whether your employer learns of your bankruptcy—will depend on the type of account and your employer’s policies regarding your account responsibility.
Types of Corporate Credit Card Accounts
Chances are, if your employer provides you with a credit card to pay for travel expenses or to purchase supplies, it will be one of two types:
- an authorized user account, or
- an obligor account.
The kind of account will affect whether you must list it in your bankruptcy paperwork (called the bankruptcy schedules) and whether you can keep using the card.
Authorized User Corporate Credit Cards in Bankruptcy
Some corporate credit card accounts are in the employer’s name, and the employer lists the employee as an authorized user. The employee can use the account for business-related expenses, which are often billed directly to and paid by the company.
If you file bankruptcy, you probably won’t have to list this type of account in your bankruptcy paperwork since it's not in your name. Since you’re only an authorized user, you should be able to continue using this card after the bankruptcy case is over.
If you still owe your employer for charges on the card—for instance, you used the card for items your employer doesn’t cover—you’ll probably have to list your employer as a creditor in your bankruptcy. Your employer will receive notification of your bankruptcy case, and assuming you file a Chapter 7 bankruptcy, the debt will be discharged (erased).
If you want to pay your employer before you file for bankruptcy, you should be aware that the trustee appointed to your case could recover the funds if you pay over a particular amount (the figure changes periodically). You’ll want to discuss this issue with a local bankruptcy attorney beforehand.
Responsible Obligor Corporate Credit Cards in Bankruptcy
If you aren’t an authorized user, you’re an obligor on the account. That is, you are liable for paying the balance. You likely have this type of account if:
- you receive the bill directly from the credit card issuer
- you seek reimbursement from your employer for business expenses, and
- you’re responsible for paying the account balance each month.
Usually, the employee and employer are both responsible for the debt on these accounts. Whether you report the account will likely depend on whether there’s an account balance when you file for bankruptcy.
- Balance on the account. You’ll list an account with a balance in your bankruptcy schedules because you’re liable for the debt. The credit card issuer will probably close the account, and the debt will be discharged in a Chapter 7 bankruptcy case.
- No balance. If the account doesn’t have a balance, you might be able to leave it off the schedule and keep the credit card. However, credit card companies and banks routinely review bankruptcy filings and credit reports and close accounts for any cardholder with a bankruptcy on record.
Before taking either approach, check with a bankruptcy lawyer.
Determining which type of account you have can be tricky. A bankruptcy attorney can confirm your account type, decide whether you must list it in your schedules, and explain how the court will likely treat the debt.
If you’d like to know how much you’ll pay for a bankruptcy attorney, see How Much Does It Cost to File Chapter 7 Bankruptcy?
If You Lose the Use of Your Business Credit Card
Here are some alternatives if you can’t use your corporate account because of your bankruptcy filing.
- Talk to your Human Resources Department or your supervisor. If you work for an employer that regularly issues corporate credit cards, you’re probably not the first employee to face this issue. Your employer might have a program to replace the traditional corporate credit card. If you are uncomfortable broaching the subject with an immediate supervisor, consider inquiring with your human resources department.
- Ask for an authorized user account. Ask to be added to a corporate account as an authorized user rather than an obligor.
- Set up a separate checking account with a debit card. You might want to ask your employer for an expense advance to fund it. If that isn’t possible, fund the account yourself and seek reimbursement from your employer.
- After filing for bankruptcy, apply for a credit card. Some lenders offer credit cards specifically for people who recently filed for bankruptcy. Others offer secured credit cards that require you to deposit or set up a savings account with the issuing bank and maintain a minimum balance. The fees and interest rate for the secured account will likely be high, but you can save the interest charges by paying the account balance in full each month.
Special Considerations in Chapter 13 Bankruptcy
In a Chapter 13 case, you can’t take on additional debt without bankruptcy court permission. The rule includes credit card use. Your Chapter 13 bankruptcy attorney should be able to advise you of your jurisdiction's corporate credit card use policy during a Chapter 13 case.