Can a Joint Bank Account Be Garnished in a Court Judgment?

A joint bank account can be garnished in a court judgment, but it's not a straightforward process. The account holder who is not the defendant in the lawsuit may still be affected.

If a joint bank account has a joint owner who is not the defendant, the court may still be able to garnish the account, but the other owner's rights will be protected.

The court will typically send a notice to the joint account holders, informing them of the potential garnishment. This notice will usually require the joint account holders to respond within a certain timeframe.

In some cases, the joint account holder who is not the defendant may be able to protect their funds by closing the account or removing their name from the account.

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Joint account garnishment can be a complex and confusing process, but it's essential to understand your rights and limitations.

Creditors can garnish jointly owned savings and checking accounts, even if you don't owe the debt. This can happen when a creditor tries to take money from your joint account to pay for the debt of the other account holder.

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The law usually presumes that you and the other account holder have equal rights to the funds in the joint account. This means that the creditor might not have to investigate whether you contributed more money to the account than the other owner.

Laws vary on the extent to which creditors can garnish joint accounts. In some states, creditors can't take more than half of the funds in a joint account, while in other states, they may be able to garnish the entire joint account.

Here's a breakdown of the laws in some states:

To protect yourself against garnishment, you should act immediately if you receive a notice of garnishment. You'll need to request a hearing in writing, stating your reasons, within the deadline specified on the notice. If you don't attend the hearing, the court may rule in the creditor's favor, and the bank will pay the proceeds of the garnishment to the court and/or the creditor.

You may be able to protect some or all of the funds in a joint account if the money came from exempt sources. Social Security, worker's compensation, disability, unemployment, and other government benefits, retirement income, and child support are exempt from garnishment under federal and state laws.

These protected assets do not lose their exemption status even when they are deposited into a joint account. As long as you can prove that the source of contributions into the account came from exempt sources, the funds are protected.

Federal rules prohibit banks from freezing money in your account if the contributions came from certain federal benefits. If federal benefits were deposited into your account, you might have some relief from creditors. The bank must allow you access to at least two months of federal benefit payments that were last deposited in your account prior to the garnishment.

Some states also limit the amount that can be garnished from a joint account. In some states, a creditor can only garnish up to half of the funds in the account. In other states, if you were not individually liable on the debt, the creditor cannot garnish the joint account unless the debt was incurred for the benefit of you and the family, or to acquire joint property.

Here's a breakdown of the possible scenarios:

If you live in a community property state, you and your spouse share liability on debts, whether or not you signed for that debt or were included as a judgment debtor. This means that a judgment creditor of your spouse can garnish your joint accounts.

Currently, there are 11 community property states and jurisdictions, including Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington, and Wisconsin. Alaska is the only state that doesn't automatically share assets as community property, and spouses must sign an agreement to share assets in this way.

In community property states, a judgment creditor can also garnish your separate account to pay for your spouse's debt, even if you didn't sign for the debt or weren't included as a judgment debtor. This can be a significant risk, especially if you have a joint account with your spouse.

Here are the community property states and jurisdictions:

You need to act fast when you receive garnishment papers. The bank will freeze your account, holding your money for safekeeping until the outcome of the garnishment process is decided.

Included with the garnishment papers is a notice of hearing, which is your chance to prove to the court that you made traceable contributions and/or that some or all of the funds deposited in the joint account are exempt.

You should request the hearing in writing, stating your reasons, within the deadline specified on the notice. If you don't attend the hearing, the court may rule in the creditor's favor, and the bank will pay the proceeds of the garnishment to the court and/or the creditor.

The court will consider whether the funds in your joint account are exempt under federal and/or state law, such as disability benefits, unemployment, or child support. If the funds are exempt, the creditor may not be able to garnish them.

You can also object to the bank levy and prove that the money in the joint account isn't yours, especially if most or all of it is owned by your spouse or other depositor.

On a similar theme: Does a Will Override a Joint Bank Account

Joint account rights and limitations can be a complex and confusing topic. In most states, creditors don't have to investigate who contributed more money to the account, which means the money in your joint account can be garnished to pay for a co-owner's debt, even if you never owed it.

The law usually presumes that joint account owners have equal rights to funds held in the account. This means that a creditor can typically garnish the entire joint account in some states, but only up to half of the funds in the account in others.

If you received federal benefits and deposited them into the joint account, you may have some relief. Federal rules prohibit banks from freezing certain amounts in your account if the contributions came from certain federal benefits. If you received federal benefits and they were deposited in the account, you may have access to money equal to at least two months' worth of federal benefit payments that were last deposited into your account prior to the garnishment.

In common law property states, the debt of each spouse remains their separate responsibility unless the debt benefited both spouses or the spouses took out the debt jointly. If you have a joint account with a spouse in a common law property state and that debt is not owned as tenants by the entirety, a creditor can garnish up to half of the funds in the account in some states, but not in others.

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Here's a breakdown of the possible outcomes:

In some states, creditors can't take more than half of the funds in a joint account. However, in other states, creditors may be able to garnish the entire joint account.

A joint bank account can be garnished, but it's not a straightforward process. The creditor must serve the bank with garnishment papers, which will freeze the account pending the outcome of the process.

The bank will hold the money for safekeeping, but it won't turn it over to the creditor yet. You must act immediately when you're served with the notice of garnishment.

You have the opportunity to prove to the court that some or all of the funds deposited in the joint account are exempt. This is your chance to show that you made traceable contributions to the account.

In common law property states, spouses are generally not responsible for each other's debts unless the debt benefited both spouses or they took it out jointly.

If you have a joint bank account with a spouse in one of these states and the debt is not owned as tenants by the entirety, creditors may be able to garnish the account.

In some states, a creditor can garnish up to half of the funds in the joint account, even if you weren't individually liable on the debt.

However, in other states, creditors can only garnish the joint account if the debt was incurred for the benefit of you and your family, or to acquire joint property.

For example, if you and your spouse have a joint credit card account, and the creditor tries to garnish it, they can only take up to half of the funds in the account in some states.

Here are the key takeaways for joint bank accounts in common law property states:

There are exceptions to the rule that creditors can garnish jointly owned savings and checking accounts. A bank account owned as tenants by entireties is protected from garnishment if the judgment is only against one of the spouses.

This is because the account is considered to be owned entirely by the couple, and the creditor cannot touch the funds. However, if the joint account is not tenants by entireties, it's a different story.

If a joint account is held between unmarried family members, such as a parent and child, the creditor can still garnish the account. This is because the account is not considered to be owned entirely by the family members, and the creditor can take the funds.

There are two common situations where a judgment debtor shares title to a bank account with a non-debtor individual. The first is when the judgment debtor is added to an elderly parent's account to help manage their finances.

The second situation is when a judgment debtor is still on an account with their child, who is now an adult. In both cases, the money in the bank account actually belongs and is sourced from the non-debtor owner.

In these situations, the funds that clearly belong to the non-debtor joint owner should be exempt from garnishment, according to the general rule that "property which is not actually and in good conscience' deemed to be owned by the debtor may not be secured by the judgment creditor."

Here are the possible types of joint account ownership:

You may be able to protect some or all of the funds in your joint bank account if they came from exempt sources. Social Security, worker's compensation, disability, unemployment, and other government benefits are exempt from garnishment under federal and state laws.

If you received federal benefits and they were deposited into the account, you may have some relief from creditors. The bank must allow you access to money equal to at least two months' worth of federal benefit payments that were last deposited into your account prior to the garnishment.

Funds in your joint account that are traceable to sources considered exempt under federal and/or state law, such as disability benefits, unemployment, or child support, may not be subject to garnishment. For example, if you maintain an account that includes SSI benefits, those benefits are exempt from garnishment under federal law.

You can prove that the source of contributions into the account came from exempt sources, and those funds will be protected. As long as you can prove the source of the contributions, the funds remain exempt even when deposited into a joint account.

The bank must allow you access to at least two months of federal benefit payments that were last deposited in your account prior to the garnishment. This may mean your entire account is exempt, even if the account is jointly held.

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If a creditor is trying to seize funds from a joint bank account, a non-debtor can dispute the seizure by showing that the account is a convenience account.

A convenience account is typically used when one person adds another to the account so they can bank for them, often with adult children and elderly parents.

You can prove that the joint account is a convenience account by showing documentation of the other person's financial contributions, such as paystubs, government pension statements, insurance statements, annuity statements, electronic transfers, or benefit statements.

To dispute the seizure, gather these documents and present them as evidence that the joint account is not a shared asset, but rather a convenience account used for the benefit of the other person.

Here are some examples of documentation that can be used to prove traceable contributions: