Dear Your Business Credit,
On Tuesday, Dec. 31, my business partner and I signed the paperwork to close our corporation and cease business operations. In a distribution of debt, I am to receive a number of corporate credit cards that he opened using his name alone and in the capacity of secretary/treasurer.
I do not trust him to cease using those cards. As president of the corporation, do I have the authority to "lock" or "freeze" any further credit on those cards to block him from adding to my assumed debt? Would the card issuers permit me to do this? What would be the best way to handle my problem? Thank you for your service! -- Rob
Dear Rob,
Between closing your business and having to work through shutting it down with a partner you don't trust, your situation sounds very frustrating. On the positive side, extracting yourself from the situation will free you to move into the next chapter of your career in 2014, whether that's as an entrepreneur or employee.
You mention that your partner has "corporate" credit cards, which are generally used by Fortune 500 companies or large organizations. It sounds to me like you have a small business, so I'm assuming that what he actually has are business credit cards. There is a difference between corporate cards and business cards. With a corporate card, the corporation often holds liability for payments; with a business card, the primary cardholder is responsible. Nevertheless, if debt has been distributed under liquidation you are right to be concerned about your partner's ability to charge more.
I contacted two attorneys to find out what you can do to protect yourself from any additional spending on the cards by your partner. Each had a different recommendation.
Leslie Tayne, an attorney with Tayne Law Group in Melville, N.Y., who advises small businesses on credit and debt, says that unless your partner, as guarantor of the account, has given the bank authorization to speak on his behalf, you can't get control over the cards on your own.
"He will need to have the partner close the accounts in order to guarantee no more spending is done," she says, with reference to your situation. To clarify, your partner can't completely close the account while there's still a balance outstanding. If he has consumer card accounts, he can cancel any further charging privileges on the accounts while the debt is being paid off.
You'll need to check the cardholder agreements for each card. You may find there is no option for even freezing spending on the accounts.
I also asked for input on your question from Robert Brennan, an attorney in La Crescenta, Calif., who specializes in wrongful credit damage and identity theft. He agrees with Tayne that if the cards are not in your name, you will not be able to stop your former partner from using them.