• Home
  • Bankruptcy in Brief
  • ABC’s of Bankruptcy
  • Considering Bankruptcy
  • True Stories
  • Chapter 13
  • Blog
  • About
  • TOC

Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box
  • How bankruptcy works
  • Mortgage Matters
  • Consumer Rights
  • You & Your Lawyer
  • Small Business
  • Family Law

Silicon Valley Horror Story: The Business Credit Card That Bit

By Cathy Moran

I’ve long said that there is no credit card for which a real, live human being isn’t liable.

(That may be an exaggeration, but not by much.)

And I’ve long worried about the prospects for success of business startups financed on credit cards.

But I’ve never seen a departing employee of a start up stuck with the bill for charges made by management after he left, until now.

He thought the card (and the balance owed) belonged to the business and he left it behind when he took a new job.

Eighty thousand dollars in charges later, he found he was on the hook as far as the card issuer was concerned.

It was a Silicon Valley horror story.

So, let’s review how this happened and what to learn from it.  Because this won’t be the last time that departing employees have gone out on a financial limb for a new venture that fails.

Who’s liable for the business card

While the card issuer may be willing to emboss the business name on the card along with yours, dollars to doughnuts, YOU are the only one legally liable to pay the bill.

Unless the card application calls for the signature of an officer of the business entity, the bank is extending credit to an individual who signs the application.

How a corporation signs its name

The business name on the plastic may make you look more “professional” or make it easier to sort business from personal expenses, but the legal liability lies with the named individual.

How management got free money

In a world of on line purchasing, possession of the card was probably sufficient to let the remaining employee charge more stuff.  When was the last time a signature was required for online use?

Maybe, the remaining employee genuinely thought the card was business property.

Or maybe not, given the nature of the purchases.

But my client left the card behind, without thought, until the collectors came calling.

Your exit strategy

Cutting ties to an employer should henceforth include cutting up the credit card.  Or more specifically, calling (and writing) the card issuer, closing the account.

Close the account, too, if the rupture is marital; don’t let more debt accrue

Closing the account doesn’t eliminate your liability for any outstanding balance, but it does prevent further use of the card.

And if the shoe is on the other foot, and you are the remaining employee and your company is actually liable on the account, close it when the named employee leaves.

 

 

 

 

More from the Soapbox

  • Has Your Social Security Number Been Suspended?Has Your Social Security Number Been Suspended?
  • Bankruptcy Drives Credit Score SurpriseBankruptcy Drives Credit Score Surprise
  • When Can I File Bankruptcy AgainWhen Can I File Bankruptcy Again
  • 7 Keys To Keeping Your House: Chapter 13 After You File7 Keys To Keeping Your House: Chapter 13 After You File
  • Debt Limits Increase For Chapter 13 BankruptcyDebt Limits Increase For Chapter 13 Bankruptcy

Filed Under: Featured, Small business, True Stories Tagged With: 2019, credit card

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Bankruptcy Basics

About The Soapbox

You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

How Bankruptcy Works

How To Pay For Bankruptcy When You’re Flat Broke

One of the cosmic ironies of our legal system is that it costs money to file bankruptcy. Bankruptcy gets you out of debt only if you have the money to file. The costs of bankruptcy include the filing fee collected by the court; the required credit counseling; and, if you're smart, an experienced lawyer to make sure … Read more

More Posts from this Category

643 Bair Island Road
Suite 403
Redwood City, CA 94063
Phone: (650) 694-4700
Phone: (650) 368-4700

Categories

All content copyright © Moran Law Group. All rights reserved.