Not My Debt. What Do I Do?

What should you do when you have unpaid debt in your name that’s not exactly your debt? I recieved this email from a reader and thought I’d share with you guys (my emphasis added):

“I went to work for a man 5 years ago and he wanted me to have a credit card but the bank couldn’t set it up so that he was on the card and have me, a non-relative, as the secondary on the card, so I got the card in my own name and he was supposed to pay it off each month. He did not do so. It now has a balance of $4800 even though I have not worked for him for 2 years. He rarely makes a payment. I have never made a personal charge or personal payment on this account as this was not to be a personal card, only for doing business in his name. I was the nanny for his three girls for three years.

Before I left his employ we did get him added to the account as someone with equal responsibility but then Bank of America would not release me from the account because I have excellent credit and he has bad credit.

The account goes to collections at the end of November. Bank of America says that they will reduce the account to $2400 if someone pays it off before it goes to collections.

I have all the paperwork and his signatures and copies of letters to and from Bank of America showing his taking responsibility for the debt and letters showing that they won’t release me from the debt because of his credit. My desire if for my husband and I to get a home equity loan on our house (which will be paid off in 6 years) in order to redo the kitchen and the bathrooms.

Will the paperwork I have to back up my story allow someone to loan us the home equity money or will it be a detriment to our attempts to get the loan?

If my husband should unexpectedly pass away will my personal credit be so bad that I will be unable to get a credit card or home equity loan under my name?

Do I: A. Continue to ignore it and ignore the collections calls that may come my way? Suffer with a big ding on my credit for 7 years until it is discharged? or B. Make the deal and pay it off myself to save what is left of my credit even though it is not my debt?”

I’m not a legal expert. But I can tell you that if my company (I work for a large software corporation) didn’t reimburse me for my approved business expenses, I’d file suit immediately. This is their debt that I incurred ONLY because I’m trying to do my job.

So obviously, my first thought is to take the former employer to small claims court. The paperwork you have, types of charges incurred, along with the employer/employee relationship will show that he is responsible. I can’t see a reason that a court wouldn’t hold him solely responsible for the debt.

But court will take some time. And BOA has given you until the end of November to settle. It seems like a good deal to me. I’d go ahead and pay them the $2,400 and then take your former employer to small claims court. Sue him for the charges, damage to your credit, and headache. Then, once you’re awarded the judgement. Send that paperwork to the credit bureaus to clean up the dings to your credit. Then you should be able to get that home equity loan, no problems.

UPDATE: I recieved some more info from the reader. This may help clear up some of the questions in the comments.

Thanks for letting me know you answered my question on your blog. I have not paid on the debt yet. I think I’ll call BOA again next week. A few weeks ago I spoke to the man I worked for and he told me again that he would take care of it. Empty words.

While I worked for this man he was sued numerous times. He ignores them. He knows this is his debt. He would just not show up in court. So if he would not show up then what happens?

My understanding from your blog is that if I take him to court, I would have legal, court ordered, proof of my story which I would use to fix my credit.

And if he doesn’t show up to court, what happens to the suit? Do I automatically win? Or is it rescheduled and rescheduled?

Fixing my credit would be a good thing. Paying on the debt just makes me mad.

Right now I am in limbo, leaning toward paying the reduced debt. I don’t want to sue him if it is going to be a long drawn out thing because he will not show up to court.

Thanks so much for taking the time to put this on your blog and send me an email. I really appreciate your time.

I advised her to contact her State’s labor board and pick their brains about moving forward. I told her that they’d likely award her the suit if he didn’t show and she had the proof it was his expenses.

What do you guys think? Do you think the court would award her the money? Should she pay the debt using the deal BOA is giving her prior to going to court? Will she ever improve her credit? Should she expect to do so, given that it was her who actually used her own personal credit card?

Want My Free 31-Step Money Guide*?

Subscribe for free. Get my guide *31 Days to Improve Your Financial Life, welcome series, and regular Five Things digest. Join 30,000+ other followers.

Powered by ConvertKit

About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon. He created this website back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence. He uses Personal Capital to track his wealth. All the content on this blog is original and created or edited by PT.


  1. FinanciallySmart says

    Yes she should paid the debt and then sued the former employer. She has to preserve her credit rating and so in order for this not to be a negative she should just do what you had advice. She should also learn from this as well by including the credit card payment in her Salary. After leaving the job go and close the account. This is a lesson to all your readers. Thanks for highlighting it.

  2. Shawn Levasseur says

    This is wrong on so many levels.

    There is no reason ever for an employee to have a company card that they are liable for. Business cards with an employee’s name on it (and the companys) are commonplace. I find it curious how this situation even came up.

    My suspicion is that the employer misled the employee as to the reason for the card having to be in the employee’s name. That essenially the employee was essentially being used as a cosigner, as the employer wouldn’t have been able to get the card at all due to his own bad credit.

    Talking to state labor authorities is an excellent suggestion. This could be an act of fraud that could even make this a criminal case as well as a civil suit.

  3. @Evan and @Mike – I love the discussion guys. See the update I added to the post above. That may provide some more insight.

  4. I am an attorney *too*, and I still disagree – why would you pay anything until they proved it was your debt? From the emailer’s broken english it is not clear whether she actually owes anything, OR was just an authorized user and they are grasping for straws to collect from someone.

    Further, let them bring it to Court then they can implead the true Obligor (if BofA fail to just name his as co-defendent).

    There is way too much missing information, to provide a useful definitive response.

  5. I *am* a lawyer, and I agree with PT. Timing-wise, I would file suit before I paid it, and then in sending the payment, I would send a copy of the lawsuit and a cover letter explaining to BOA that I was paying it only to mitigate damage to my credit, that I did not admit owing the money, and that I intended to pursue recovery from the proper obligor. That way you have evidence to show future lenders, etc. that you weren’t paying because you thought you owed the money, but because you were trying to stop the bleeding.

  6. Talk About Debt says

    What a nightmare. In the UK you would be liable for the debt as it’s in your name. You might be able to take your old boss to court as he’s in broken your agreement. I am guessing you’ll have to pay unless you go legal on your old boss. Hopefully the treat of a lawyer make sin pay up. Good luck.

  7. It’s in your name, right? Your credit is already getting dinged with the late payments and overdue balance, so letting it go to collections a little while longer probably isn’t going to hurt much more.

    You owe none of the $4800, right? I say, sue the boss first (well, call him first and let him know you are going to sue to see if you can get money from him) to get some cash, THEN call BoA to settle. Remember, they are offering you that $2400 deal because they know they are not going to get it all. If you wait a little longer, the deal may be better or you may be able to counteroffer.

    Please, please, reconsider not taking a loan to work on the house. Can you save the cash and get it done in smaller increments instead? Debt of any kind is such a headache.

    And, unless he has been the sole breadwinner, if your husband died (god forbid), you’d still be able to get credit based on your income, credit history, etc. (Although see my point about not getting new debt, above).

    Good luck with the jerk of a boss. Sorry you are having to deal with this.

  8. woah woah woah!

    So you guys think she should pay $2400 in the hopes that she recovers it from a deadbeat? If BofA hasn’t gotten him to pay what hopes could you possibly have for her to recover ANY money from him?

    First off – NEVER EVER Ignore any official letters from banks, courts or collections.

    Second – the question should be asked whether this is actually her debt. She may have just been an authorized user, not a co-debtor in that case FIGHT IT!

    Third – BofA “offers” $2400 and you guys jump? Even if you are going to take the deal (and I wouldn’t) you should at least counter offer!

    I would tell this reader – I need more information.

  9. Yes. Pay the $2,400, get that monkey off your back, then sue in small claim’s court for the original balance of $4,800 plus headache money.