How Are Joint Bank Accounts Affected by North Carolina Bankruptcy When Just One Person Files? Skip to main content

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How Are Joint Bank Accounts Affected by North Carolina Bankruptcy When Just One Person Files?


Bank account

Be careful with a joint bank account.

Image Source: Flickr User Betsssssy

If you share a bank account with a significant other, spouse, friend, or family member, you should be aware that if one of you winds up deep in debt, all the funds in that account could be at risk. This is particularly serious if it comes down to a garnishment or bankruptcy filing. Here are some things you should know about joint bank accounts.

#1 Garnishments Don’t Differentiate Whose Money It is

In North Carolina, the law offers many protections to consumers including a ban on most wage garnishments. Unless you owe the IRS or child support/alimony, your wages are generally safe from garnishment. However, your bank account may not be as safe.

If a creditor sues you in the NC court system and gets a judgment for a debt, they can try and garnish funds in your bank account. If you share a bank account, the garnishment won’t respect whose funds they’re taking. If your name is on the garnishment and the account too, then it’s open season.

#2 Trustees Could Take It All in North Carolina Bankruptcy

If you have a joint bank account and are considering bankruptcy, it’s best to split up the money and open an individual account before you file. If your name is on the account, even if you didn’t earn it, the trustee could consider it your asset and thus available to your creditors.

In fact, if you’re deep in debt, splitting off and taking your name off any accounts you share is wise in case of lawsuit or bankruptcy. This draws a clear line in the sand of what’s your money and what is someone else’s so no one else ends up paying for your debt.

#3 Bank Offset is a Concern 

Another banking concern is the “right of offset.” If you have a credit card or loan through the same financial institution where you bank, there may be some fine print in the credit agreement that allows the bank to take money from your account to satisfy debts.

In some cases, this even overrides bankruptcy petitions. If you have a joint or individual account at a bank where you have a credit card, auto loan, or mortgage, and you’re delinquent on payments, setting up new, individual accounts at a totally new bank could prevent your account from being drained.

#4 Blended Funds Risk Money that Should be Sheltered

In North Carolina, certain types of income are not considered “income” when calculating bankruptcy repayment plans for Chapter 13. Social security payments, for example, are excluded. However, if your SSI payments are direct deposited with non-exempt income, it can complicate matters.

This can make it difficult to distinguish which funds are yours, which belong to your joint account holder, and which are eligible for your creditors to access. It’s best to segregate social security income into an account of its own with no other funds coming in and which only you can access.

Find Out More About North Carolina Bankruptcy

If you’re deep in debt and need significant relief, North Carolina bankruptcy may be a solution for you. But before you file, it pays to do some prep work, including splitting up joint bank accounts to protect others’ income from your debt.

In fact, even if you’ve already been garnished, filing NC bankruptcy within a certain time frame after the money is taken could help get the funds returned to you. Contact the Law Offices of John T. Orcutt today to discuss the benefits of North Carolina bankruptcy.

Call +1-919-646-2654 now for a free NC bankruptcy and debt relief consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.

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