Financial lawyers hear this one all the time: Can creditors take funds if they're held in a joint account? The answer is a little complicated.
Can Creditors Take Funds In a Joint Account?
Unless a person gave a creditor permission to withdraw funds from his or her bank account upon default - which may be the case if the creditor is the bank where your accounts are held - the credior must first file a civil action and prove that you owe the alleged debt.
If the court finds in the creditor's favor, a judgment is then entered and the creditor has the right to seek a levy on assets and to garnish wages. The first place a judgment creditor will look to recover from will be bank accounts. And yes, they can levy a joint bank account.
Just because the bank account has been levied does not mean that the funds in the bank account will be turned-over to the creditor, however. Levied funds are simply being held by the Sherriff of court officer until further directed by the court as to what to do with the funds. The creditor must request an order from the court and provide the debtor notice that it is seeking to have the levied funds turned-over to it. This is where things get interesting.
Who Owns the Money In a Joint Account?
The creditor only has a right to collect the funds that belong to the judgment debtor. If the judgment debtor can show which joint account holder actually contributed the funds that were deposited into the joint account, the creditor will have a right to only those funds the judgment debtor deposited. So in a situation where say a spouse contributed all the funds, the creditor will not be able to have the levied funds turned-over to it.
Of course it is difficult to prove were the funds originated. And that is way more often than not, the court relies on the presumption that money held in a joint account belongs in equal shares to all parties having a right of withdrawal.
If you have questions about debt management or issues related to creditors, please feel free to contact a financial lawyer in one of our New Jersey offices.