If you work for a company that requires you to maintain a corporate credit card to cover expenses, you may be wondering what happens to that credit card if you file for bankruptcy. Do you have to list the corporate credit card in your bankruptcy? Can you get rid of the debt? And can you keep using the card?
How your employer and the lender treat the account will depend on:
- the type of account you have, and
- your employer’s policies on your responsibility for the account.
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 -- either you will be an authorized user or an obligor on the account. What type of account you have may affect whether you must list the account in your bankruptcy paperwork (called the bankruptcy schedules) and whether you can keep using the card.
Determining which type of account you have can be tricky. Consult with a local bankruptcy attorney to determine which type of account you have, whether you must list it in your schedules, and how the court is likely to treat the debt.
You Are an Authorized User on the Account
For some corporate credit cards, the account is in the employer’s name and the employer lists the employee as an authorized user. The employee is allowed to use the account for business related expenses, which are often billed directly to and paid by the company.
If you file bankruptcy, you may not have to list this type of account in your bankruptcy paperwork since it's not in your name. However, if you still owe your employer for charges on the card (for example, you used the card for charges that your employer doesn't cover and that you normally reimburse your employer for), you will probably have to list your employer as a creditor in your bankruptcy. Your employer will be notified of your bankruptcy case and the debt will be discharged. If you want to pay your employer before you file for bankruptcy, discuss this with a local bankruptcy attorney to find out if you are allowed to do.
Since you are only an authorized user, you should be able to continue using this card after the bankruptcy case is over.
You Are an Obligor on the Account
If you are not an authorized user, you are an obligor on the account. That is, you are liable for the balance. Usually on these accounts the employee and employer are jointly responsible for the debt. This is the type of account you likely hold if you seek reimbursement from your employer for your business expenses, receive the bill directly from the credit card issuer, and are responsible for paying the account each month yourself.
Balance on account. If you file bankruptcy, and you have a balance on this account, you must list it in your bankruptcy schedules because you are liable for the debt. The credit card issuer will probably close the account, and the debt will be discharged in the bankruptcy case.
No balance. If the account has no balance, you might be able to leave it off the schedules. In this situation, you may be able to keep the credit card. Not always, however. Some credit card companies and banks routinely review bankruptcy filings or credit reports and close accounts for any cardholder with a bankruptcy on record.
What to Do if You Can No Longer Use Your Business Credit Card
Here are some alternatives to consider if you can no longer use your corporate account because of your bankruptcy filing.
Make a direct appeal to the lender to keep the account open. The lender may be receptive to keeping the account open if you carried no balance at the time of the bankruptcy filing and have an otherwise good relationship with the lender.
Talk to your Human Resources Department or your supervisor. If you work for an employer that regularly issues corporate credit cards, you are probably not the first employee to face this issue. Your employer may have a program in place to replace the traditional corporate credit card. If you are uncomfortable broaching the subject with an immediate supervisor, consider making an inquiry 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 as an obligor.
Set up a separate checking account with a debit card. And ask your employer for an expense advance with which to fund it. If that is not possible, you'll have to fund the account yourself and seek reimbursement of the charges from your employer.
After filing bankruptcy, apply for a credit card. A good place to start is your company sponsored credit union. Other lenders offer credit cards specifically for people who recently went through a bankruptcy case. Other lenders offer secured credit cards. Secured accounts require that you make a 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 higher than for other accounts, but you can save the interest charges by paying the account balance in full each month. (Learn more about secured credit cards.)
Special Considerations in Chapter 13 Bankruptcy
In Chapter 13 bankruptcy cases, you cannot take on additional debt without bankruptcy court permission. This includes using a credit card. Most Chapter 13 trustees have a policy and a procedure for incurring debt while a case is pending. That policy may address company credit cards for those debtors who must advance business expenses and await reimbursement. Your bankruptcy attorney should be able to advise you of your jurisdiction's policy on the use of corporate credit cards during a Chapter 13 case.