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Til debt do us part: a primer on joint credit

"Joint debt." Seems like a fairly simple concept, right? Two people are named on a particular debt (typically a credit card), and they both are responsible for the debt. Right? Well, that's not always how it works. Just like there are different types of joint credit, there are different kinds of joint debt.

Different types of joint credit

There is a huge difference between co-signed accounts, joint accounts and having one or more authorized users on a preexisting account.

What is a co-signed account?

A co-signed account is just that: a line of credit that two people sign for. Co-signed accounts are not "joint accounts" in the strict sense of the word, though. The co-signer doesn't have any legal right to the account, meaning that the co-signer does not get a copy of the credit card that was opened, and he or she doesn't have the right to drive the car that was financed in part by his signature.

A co-signer probably won't have access to monthly statements about the account. He does, however, have all the legal responsibilities for paying the debt should the account holder default on the payments.

What is a joint account?

A joint account is one in the name of two or more people. Both of are named on the account, both have access to statements or accountings, and both are responsible for the entirety of the debt should the creditor begin collection proceedings.

Joint accounts are typical for many married people, but can be quite sticky should the marriage end because a family court's decree that the husband be responsible for paying the credit card has no bearing whatsoever on the company itself. In the eyes of the company - and the law - all named persons on a joint account are legally responsible for the entirety of the debt if the account goes into default.

What is an authorized user?

An authorized user is someone who legally has permission to use an account (typically a credit card or other line of credit) belonging to another person. This is typical for parents when a child goes to college, and it actually a much smarter financial move than co-signing a loan or credit account for a child, since the child's default would put the parent legally responsible for the debt, even after the child has turned 21.

The authorized user on a credit card or line of credit usually doesn't have access to monthly statements, and has no right to demand an accounting. While it may be possible that a lender would try to recover the cost of purchases made by the authorized user if the account holder defaults, that is not the "norm," and authorized users often have no legal obligation to cover the debt if the named account holder defaults.

Knowing the basics of how different types of joint debt arrangements work can mean the difference between a successful joint credit venture and a huge financial liability. That knowledge is particularly important in times of economic uncertainty. Regardless of the type of debt involved, though, if your debt has become unmanageable, consider seeking the advice of an experienced bankruptcy attorney in your area to learn more about your legal rights and options.