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October 2004 - Credit Rating of a Teenager Shattered by Supplementary Credit Cards

Credit Rating of a Teenager Shattered by Supplementary Credit Cards

☳ by Adam Aspilla

There are parents who want to give their children almost everything they want to make them happy and to demonstrate to their children that they really love them. In fact, there are parents give their children supplementary credit cards, so that their children could immediately buy what they want. Parents who give supplementary credit cards to their children have good intention, however, in many cases the end result is detrimental to the interest of their children’s future.


A good example was parents of an eighteen-year child who had credit cards with a combined credit limit of $70,000.00. Both had good jobs and with excellent credit ratings. Unfortunately the father was laid off from his good paying job. As a result, he was forced to accept a menial job with a much lower income than his previous employment.


The couple was not so good in managing money that despite their good income before the husband lost his previous job, they were able to accumulate credit card debts in the amount of $60,000.00. They did not set aside a portion of their income for “rainy days” so to speak, believing that they both could keep their good paying jobs until retirement.


With considerable lower combine monthly income, it did not take long the couple defaulted their payments on their debts. Due to their financial circumstances: no house, no investment, old cars and with income barely enough to pay their basic needs, no surplus income to pay for their creditors—the only option was for them to file for bankruptcy.


At the time of filing for bankruptcy, they did not inform the bankruptcy trustee that their son had supplementary cards, thinking that their son has nothing to do with it. As a result of bankruptcy, the creditors could no longer pursue collection activities against the couple. However, the son who was jointly and severally liable as a supplementary cardholder on some of the credit cards, the creditors could run after him for the full amount of the outstanding balance (principal plus interest).


Unhappily, creditors are unrelenting on their collection efforts; as a consequence the son is now hounded by collectors and threatened to be sued if he is unable to pay the amount of $25,000.00 which was the amount owing on the credit cards he was a supplementary cardholder at the time his parents went bankrupt. By the way, the son also contributed to the couple’s financial trouble for he squandered $20,000.00 out of the $25,000.00 on unnecessary things and for pleasure and entertainment with his friends.


Whether the son could come up with the money or not, his credit rating is already shattered, much more if he would be forced to file for bankruptcy. The predicament of the son is a result of good intention on the part of the parents but the outcome was disastrous for their child.


Parents’ love to their children should include discipline. Love without discipline could ruin child character. According to an unknown writer: “ un-discipline child will grow a barbarian.” Giving supplementary cards to children is not a good idea for two reasons: 1) a child is tempted to buy items or spend money indiscriminately on things which are not important and 2) when the parents are drown with debts, a child would also sink with them as in the above scenario. Proverbs 22:6 says: “Train up a child the way he should go, when he is old he will not depart from it.” 


Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.