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Jointly Owned Bank Account

Occasionally a debtor will “forget” that her name is listed as a joint owner of a family member’s bank account. The usual case is with a parent, and often social security is involved. For whatever reason, many people do not set up transfer on death elections for an elder person’s bank account, and instead list themselves as joint holders of the account. Consequently, there is a presumption during bankruptcy that one-half of everything in the account belongs to the debtor. This can cause a sticky situation for the debtor and her attorney.

The simple solution is for the debtor to disclose her joint interest in the account to her attorney prior to filing the case. The attorney would then tell the client to withdraw any money she has and get her name off the account. Then there is only a matter of disclosing a closed account on the bankruptcy forms and explaining the situation to the trustee.

When the debtor forgets to do this, the trustee will sink his teeth into the case. You must prove that the money in this joint account is not yours. Failing this, you can divide the money in half, and protect it with an exemption. However, the trustee could also object to your claimed exemption on the basis that you concealed the asset from the bankruptcy proceedings! In the worst case of a forgotten bank account, the bankruptcy court may compel you to turn over the amount in the account.

When your attorney asks you to list all of your financial accounts, it means all of the accounts that are in your name, whether it is your money or not. That way your attorney can properly advise you and avoid complicating your bankruptcy.