Joint bank accounts offer a convenient way for couples to budget, pay shared bills, and ensure easy access to the assets of the account, in the event of one person’s death. A joint account can also offer an exciting opportunity to solidify trust in a relationship. This excitement can quickly turn into a nightmare, however, when a judgment creditor has the account frozen due to one person’s debt.
Creditors can satisfy judgments by having a debtor’s bank account frozen through the garnishment process. In Minnesota, prior to garnishing a jointly held bank account, the creditor and the bank are under no legal obligation to differentiate between the contributions of the co-account holders. Judgment creditors can have the bank seize all assets in the account, equaling up to 110% of the creditor’s claim. Account holders are not notified until after their accounts have been frozen. While non-debtor account holder contributions are legally exempt from garnishment, it is up to account holders to prove the exemption once the garnishment process has begun. Providing proof can take precious time during which neither person will have access to funds. Even after receiving proof of the non-debtor’s contributions, it can take up to six business days before the bank releases exempt funds. This time lapse can result in unpaid bills, bounced checks, and overdraft fees.
If you receive notice that your joint account has been garnished, it is important to take immediate steps to establish the non-debtor account holder’s contributions to the account. Notify the creditor and the bank. Provide them with verification of the non-debtor’s contributions to the account. For verification, you should provide bank statements dating back at least 60 days, copies of checks deposited in the non-debtor’s name, and direct deposit statements. Include a signed, notarized statement explaining the amount of money you are claiming to be exempt from garnishment as the non-debtor account holder’s contributions. The non-debtor has the right to have his or her contributions released from garnishment within six business days of providing verification, unless the creditor files an objection. If a creditor refuses to release the non-debtor’s contributions, seek legal counsel.
The process for proving non-debtor contributions to a joint account can be complicated. Keep this in mind when considering whether to open a joint account in the first place. If you know your partner has judgments or other delinquent debts, you both may be better off keeping your accounts separate.