In debt due to fraud?
Guess what—it’s yours
Your con artist beau may have conviced you to:
- Spend all your money paying his expenses
- Give him a credit card
- Put his purchases and cash advances on your credit card
- Take out a home equity loan to finance his “business ventures”
- Co-sign a mortgage or loan with him
- All of the above
Now he (or she) is gone, you’re in debt, and there’s more bad news: Even if the bum is found guilty of fraud in court, you are still responsible for the debt.
The United States Department of Justice publishes a booklet called Rights, Roles and Responsibilities—A Handbook for Fraud Victims Participating in the Federal Criminal Justice System. The handbook was developed “to address your needs and provide you with important information.” But some of the points that it makes are far from reassuring:
- The chances of recovering your financial losses from the defendant are usually small.
- Being a crime victim does not excuse you from paying debt you incurred before or as a result of the crime.
- Losses are usually not deductible on state and federal income tax returns.
Credit card debt
Who is responsible for credit card debt? If your name is on the account, you are.
A credit card account is a legal contract between you and the bank that issued it. There are three types of credit card accounts:
- Individual account. You alone are responsible for paying off the debt.
- Joint account. If you and your beau open a joint credit card account, you are equally responsible for the debt. Even if your beau was the only one using the credit card, the credit card company can demand payment from you.
- Authorized user. If you named your beau as an authorized user of your credit card, you are totally responsible for the debt. He is not responsible at all.
You may have heard that in cases of credit card fraud, you are only responsible for $50 in charges. This is true only when your credit card is lost or stolen and used without your knowledge. Giving your beau a credit card is not an “unauthorized use.” According to the credit card companies, you authorized it. Pay up.
Suppose you married someone who turned out to be a sociopath—or for that matter, any irresponsible ne’er-do-well. Suppose you divorce, and your divorce decree mandates that your ex is to pay the balance on your joint credit cards and mortgage. Suppose he or she doesn’t pay.
The creditors can come after you. They are not parties to your divorce decree and you are still legally responsible for joint credit card accounts.
If your ex is a sociopath, you must assume that he or she will not honor the terms of your divorce settlement. Therefore, if your ex is supposed to pay off joint financial obligations, get your name off them.
The mortgage should be refinanced, with your ex solely responsible. Your lawyer must also file paperwork to take your name off the deed to any property.
And the credit cards—by law, a creditor cannot close a joint account because of a change in marital status, but can do so at the request of either spouse. However, the creditor does not have to change a joint account to an individual account.
There’s more. According to The Credit Repair Kit, by John Ventura, “if your spouse fails to pay a particular creditor, the creditor can seek payment from you, if your name was on the account when the debt was first incurred.
A sociopath will happily bleed you until your cash and credit are gone. If your debts become too burdensome, you may feel you have no choice but to declare bankruptcy. Here are a few things you should know:
- Bankruptcy does not erase your debts. You still owe the money—it’s just that the creditors can no longer try to collect it.
- Even if you had a sterling credit record before the bum came into your life, bankruptcy wrecks it.
- Negative information about the accounts you did not pay stays in your credit file for up to seven years.
- The bankruptcy itself stays in your credit file for 10 years.
But, you say, your financial problems are not your fault—you were defrauded. To explain or dispute negative information in your credit file, you may submit a 100-word statement to the credit bureaus—Equifax, Experian and TransUnion. The Fair Credit Reporting Act states that they must include your statement in your credit report.
It’s a nice gesture, but it may not help. As The Credit Repair Kit points out, many credit applications are evaluated by computer. Or, creditors make a decision based on your credit score—a three-digit number with no detail. Your statement explaining how your credit was damaged may never be read by a human being.
Unfortunately, if your beau ruined your credit, you’ll be living with it for a long time.