Jan L. Warner & Jan Collins
Question: When my husband and I divorced after only three years, he agreed to pay nearly $25,000 in joint credit card debt, much of which was caused by my addiction to gambling and video poker. Thankfully, we had no children. Even though I was in counseling for nearly six months, I never got over my addiction. In order to avoid this problem again, part of my counseling dealt with teaching me not to use credit cards or get access to credit to feed my habit. Although I did not apply, I was offered four credit cards in my name by mail with total credit limits of $20,000. All I had to do was confirm my income (which is over $30,000 annually) and date of birth. They never asked for any other information. I let these offers sit for a month before I sent them in when I could no longer resist the temptation. Within six weeks after receiving the credit cards, I had not only used up, but also exceeded my total credit limits in video poker establishments, and now I can’t afford to pay the bills. I own no assets. The credit card companies are now threatening to sue me and ruin my credit. What can I do?
Answer: The vast majority of all credit cards issuers today use a pre-approved screening process by which potential customers are identified after a credit bureau screening is matched to internal risk models of the credit card issuer to determine creditworthiness. Because your former husband paid off high balance joint credit card debts, you were deemed to have good credit and became a target for pre-approved credit card issuers.
After you returned your acceptance (which probably included your income, Social Security number, date of birth, and telephone numbers), there was a second screening before you were issued your credit cards without a request for additional information.
Based upon your situation, one available option is for you to attempt to discharge these obligations through a Chapter 7 bankruptcy. You did not ask for the credit cards. You were not asked for additional financial information, a list of debts, or anything else. You were just sent the credit cards. Since you made no representation to the credit card issuers upon which they relied in issuing these cards, there was no fraud on your part.
At the same time, the credit-card industry must begin to assume more responsibility for their lending practices which often target high-risk borrowers based upon an unreliable "risk score" which is calculated by a credit bureau. Because credit card issuers are looking for customers who have high balances and do not pay off their account each month, one of the components in this score gives a favorable rating to those who carry high balances and, therefore, pay more interest.
While bankruptcy will certainly affect your credit in the future, having good credit seems to have caused you continued problems with your addiction. We suggest that you consult with a bankruptcy lawyer as soon as possible. Since bankruptcy judges tend to give debtors a fresh start, and since you have this serious addiction, we believe that you should be successful.
SoloFact: What is Bankruptcy: The United States Bankruptcy Code is divided into several “Chapters”: 7, 11, 12, and 13. In a Chapter 7 proceeding, all non-exempt property is sold and distributed to creditors. In the remaining three chapters, there are a number of kinds of debt reorganization plans which allow the debtor to keep his or her property and repay the creditors over a period of time. Although Chapter 11 generally involves businesses, individuals can also use it. Family farmers with regular annual income generally use Chapter 12. And folks with regular income can use Chapter 13.