When filing for bankruptcy protection there are many factors that can influence the outcome of your case. There are different types of debts that may or may not be eligible for discharge through bankruptcy. The type of account the debt is tied to may also play a role in the outcome of your bankruptcy case. An account that is shared with another individual, or joint account, can produce problems in a bankruptcy proceeding.
Debts In A Joint Account
People on a joint account are sharing liability for that account and any debts accumulated on those accounts. In the case of a bankruptcy filing, all persons listed as owners of an account can be affected by the bankruptcy. If one owner of an account files for bankruptcy and receives a discharge of the debt, the creditor can still pursue the remaining account owners. When a creditor is granted a seizure and liquidation of a joint account, all owners of that account are affected by the liquidation. Bankruptcy requires that all assets and debts be listed on the bankruptcy petition. Joint checking or savings accounts may be at risk in bankruptcy. However, this does not mean that all assets of joint accounts will be liquidated in order to satisfy the debt owed. Many times, one account owner may be able to prove they were solely responsible for the debt, and alleviate the remaining account owners from responsibility. Also, if one account owner can prove they own a certain amount of the assets, the remaining assets may be exempt from the risk of liquidation.
Joint Account Considerations
If you are one owner of a joint account, make sure you do not attempt to transfer assets to another party, including remaining owners. The bankruptcy court may view this action as your attempt to conceal an asset and consider it fraud. It is also a good idea to limit joint ownership of accounts. Generally, spouses should have only two or three joint accounts. To prevent any trouble for minors or dependent children, list them as authorized users on your account and now account owners. It is also a good idea to review your states bankruptcy exemptions to determine if there are any further laws regarding bankruptcy protection for certain types of joint accounts.