What Happens When a Creditor Tries to Garnish a Joint Bank Account?
- Federal laws exempt funds that you receive from certain sources from garnishments whether those funds are held in jointly owned or single ownership accounts. Creditors cannot garnish Social Security benefits, Supplemental Security Income benefits, federal retirement or civil service benefits, disability payments or student assistance proceeds. Federal laws also protect funds you receive in the form of merchant seaman wages, railroad retirement benefits, foreign service disability or retirement money, and harbor workers’ or longshoremen’s death and disability benefits. Proceeds received from the Federal Emergency Management Agency and certain types of federal compensation are also exempt from garnishments.
- In the state of Maryland, creditors cannot typically garnish money held in a joint bank account unless the creditor won a judgement against both of the account owners. In the state of Utah, no such restriction applies to garnishing joint bank accounts. In that state, you must take measures to protect your money from garnishments attached to the account due to judgements against the co-owner. Those steps could include moving money to a single ownership account. Laws vary in other states. Some states, including Florida, have laws that prevent parties from garnishing your bank account if your account balance does not exceed a certain level. Such laws apply to both single ownership and joint accounts.
- While laws exist that cover the issue of garnishments, they are sometimes ambiguous and open to interpretation. In 2007, a Minnesota court ruled that a creditor could garnish funds from a joint account only if the creditor could prove the funds belonged to the debtor against whom the creditor had obtained the judgement. In 2010, the Minnesota supreme court interpreted the same laws differently. The court ruled that the account owners must make a case to prove that the money in the account did not belong to the subject of the garnishment. In the absence of proof of ownership, the creditor could assume that all of the money in the account belonged to the subject of the garnishment.
- While federal laws prevent creditors from garnishing certain types of income, you may have trouble protecting your funds if your account contains both funds that are exempt from garnishments and funds that are not. The same kind of issues arise when joint owners both pay funds into a single account, because the deposits made by both owners are commingled once inside the account. Ideally, you should try to resolve debt issues before garnishments become a reality; but if you cannot afford to do so, you should notify the other account owners of the issue and consider opening up separate accounts.