Understanding Supplementary Credit Cards and How They Work

It is tough when you have been dealing with debt and you are trying to find a way out. Filing for bankruptcy in Canada might feel like a last resort, but it is a step many people take to get out of overwhelming debt.

If you are a supplementary cardholder, though, you might be wondering—how does bankruptcy impact you and your financial responsibilities? Let’s dive into it.

What Does It Mean to Be a Supplementary Cardholder?

A supplementary cardholder is someone who is added to a credit card account as an additional user, but the responsibility for the account still rests with the primary cardholder.

Supplementary cardholders have access to the credit limit and can use the card to make purchases, but they are not the account holder and are usually not responsible for paying the bill.

Here’s the difference between primary and supplementary cardholders:

• Primary Cardholder: This is the person who applied for the credit card, signed the agreement, and takes full responsibility for managing the account—including paying off any debt.
• Supplementary Cardholder: This person is added to the account by the primary cardholder. A supplementary cardholder can make purchases, but does not own the account or have legal responsibility for paying off the debt.

The financial link between the two cardholders is important, especially when debt issues like bankruptcy come into play.

The Connection Between Primary and Supplementary Cardholders

While supplementary cardholders can use the account to make purchases, the primary cardholder is usually the one on the hook for the debt. But that does not mean supplementary cardholders are completely off the hook.

If the primary cardholder racks up a balance, it could impact both parties—especially if you share financial obligations. For example, if you are in a marriage with shared expenses or responsibilities, like car payments or child support. Although supplementary cardholders are not legally responsible for the debt, missed payments or a default on the account can still affect their credit.

Liability for Debt as a Supplementary Cardholder

In bankruptcy situations, supplementary cardholders generally do not assume direct liability for the debt of the credit card account unless they were also a co-signer or have another specific agreement. However, being a supplementary cardholder could still have some indirect consequences.

If the primary cardholder files for bankruptcy, the supplementary cardholder is not automatically responsible for the debt on the credit card account. However, the credit card issuer may close the account, and the supplementary cardholder will lose access to the credit line. Furthermore, if the debt is a lot, it may negatively impact the supplementary cardholder’s credit score.

Who is Responsible for the Debt?

In most cases, supplementary cardholders do not have direct liability for credit card debt, unless they are also a co-signer or have a specific agreement in place. But if the primary cardholder files for bankruptcy, things can still get complicated.

Here is what might happen:

• No Legal Responsibility: You will not be automatically responsible for paying the debt.
• Account Closure: The credit card issuer will likely close the account, leaving you without access to the credit line.
• Impact on Credit Score: Missed payments or defaults before bankruptcy can show up on your credit history, affecting your score.

How Does Bankruptcy Affect Supplementary Cardholders?

When a primary cardholder files for bankruptcy, it can have several ripple effects on the supplementary cardholder:

• Account Closure: The credit card account will almost certainly be closed, cutting off your access to the credit line.
• Credit Score Impact: Even though you did not create the debt, the account’s payment history could hurt your credit score.
• Loss of Credit Access: Without access to the card, you will need to adjust any financial plans relying on it.

Will Bankruptcy Hurt Your Credit as a Supplementary Cardholder?

The short answer: Yes, it can. If the primary cardholder’s account had missed payments or defaults, that negative history might be reflected on your credit report as well.

Additionally, when the account is closed, it can impact your credit utilization ratio. This is the amount of credit you are using versus your total available credit. Impacts on this ratio could lower your credit score.

What Happens to the Supplementary Card After Bankruptcy?

Once the primary cardholder files for bankruptcy, your access to the card will likely end. The credit card issuer will close the account, and you will not be able to make any further purchases. Depending on your credit history, you might be able to open your own credit card, but it is a good idea to check your credit report to see how the situation has affected you.

How to Protect Your Credit

If the primary cardholder is filing for bankruptcy, here are a few steps you can take to protect yourself:

• Contact the Credit Card Company: Ask what will happen to the account and whether your credit will be affected.
• Check Your Credit Report: Keep an eye on your credit history for any changes related to the account.
• Build Your Own Credit: If you do not already have your own credit card, now is a good time to apply for one to build your independent credit profile. 

Other Ways to Protect Your Credit

Here are a few tips to minimize the impact of bankruptcy:

• Ask to Be Removed from the Account: If you think the primary cardholder’s situation might hurt your credit, consider asking to be removed as a supplementary cardholder.
• Pay Off Other Debts: Keeping your other accounts in good standing can help offset any damage to your credit.
• Look Into Other Credit Options: Consider applying for a secured credit card or another type of account to keep building your credit.

Can a Supplementary Cardholder File for Bankruptcy?

Supplementary cardholders have the option to file for bankruptcy, separately, if they are facing their own financial difficulties. But filing for bankruptcy is separate from the primary cardholder’s bankruptcy.

If you are a supplementary cardholder and decide to file for bankruptcy, it will not directly impact the primary cardholder. That said, any personal debts you owe—like your own credit cards, loans, or other obligations—will be included in your bankruptcy filing.

Joint Debt vs. Supplementary Cardholder Debt

Here is the difference between the two:

• Joint Debt: This means both of you are legally responsible for repayment—think of debt like joint credit cards or loans.
• Supplementary Cardholder Debt: On the other hand, this is the primary cardholder’s responsibility. But there is a catch: if their bankruptcy leads to missed payments or defaults—where they do not pay it back—their credit card debt could still show up on your credit report.

While you are not on the hook for the debt, the ripple effects could still hit your credit.

Alternative Options to Consider Before Bankruptcy

If you are looking for debt relief, bankruptcy is not your only option. Both primary and supplementary cardholders can try these debt management options to regain control of their finances:

Consumer Proposal

A consumer proposal is a legal, formal agreement where you work with your creditors to pay back only part of what you owe. Think of it as a way to hit reset on your finances without going through bankruptcy.

It is a government-regulated option that can give you debt relief while helping you keep your assets. Plus, it comes with a clear repayment plan, so you know exactly what your monthly payments will look like. If bankruptcy feels like too much, a consumer proposal to tackle your credit card debt might be the right fit for you.

Seeking Legal and Financial Advice

If you are feeling unsure about what to do next, do not worry—you are not alone. Whether you are a primary or supplementary cardholder, navigating the financial and legal aspects of debt can feel overwhelming.
 
That is why it is important to speak with a professional, like a Licensed Insolvency Trustee. They can help you understand your options and responsibilities, giving you the clarity and confidence to move forward.

How Farber Can Help

Already dealing with debt and wondering where to start? At Farber, we understand that situations like these can feel stressful. Even if you are a supplementary cardholder, bankruptcy can have ripple effects, and knowing how it might impact your credit score or financial health is key.

Let us help you sort through the confusion. Book a free consultation today to connect with one of our experienced Debt Solutions Managers. We will walk you through your options, whether it is understanding the relationship between primary and supplementary cardholders, addressing credit score concerns, or exploring ways to protect yourself from further financial consequences.

The sooner you take action, the sooner you can get back on track!