Are Children Responsible for Debt Incurred While They Are Minors?

Children aren’t typically responsible for debt incurred while they are minors because they cannot legally enter into a contract. There are life and legal circumstances that free children from parental dependence and makes minors responsible for their debts. This is called emancipation, and the laws governing it vary by state. Though children are protected from lawsuits and collection attempts, there are often serious financial consequences for minors who’ve incurred debt or failed to protect their credit.

Applying for a credit card or loan, which includes accepting billed services such as health care, implies the ability and intent to make the payments, as well as an agreement to abide by the lender's repayment schedule, interest rate and fees. Companies must disclose their terms prior to extending credit, and once credit is accepted or used, as with credit cards, the borrower has entered into a contract. Every state and the federal government have laws specifically forbidding offering credit to minors.

Minors are considered adults if they marry, join the military, or are emancipated by court order and therefore enjoy many of the rights and accept all of the responsibilities of adulthood. Emancipated minors are barred from voting or quitting school, but are expected to pay debts and may be sued in court for failure to do so. The federal government does not consider emancipation under credit protection laws and typically requires credit seekers under 21 to have a co-signer and demonstrate ability to pay.

Though minors cannot be held legally responsible for the debt they incur, that debt can have negative consequences well into adulthood. Unpaid debt shows up on credit reports, which can adversely affect your ability to obtain future credit and can result in higher interest rates when credit is extended. Poor credit can also hurt educational and employment prospects; access to student loans can be impeded, and human resources managers routinely consider an applicant’s credit in the hiring process.

A minor shouldn’t have a credit report, but millions do. Thousands of children are victims of identity theft annually. Find out whether a credit report exists by contacting the main reporting agencies Equifax, TransUnion and Experian. If a record exists, even though you never used credit before, freeze or flag the report for activity, which alerts merchants and reporting agencies that any credit request is fraudulent. Additionally, secure documents such as birth certificates and Social Security cards in a safe place, such as a safe deposit box at a bank, and avoid sharing personal information online or in email to protect against identity theft to avoid fraudulent debt-history reports and damaged credit.