Will My Bad Credit Affect My Spouse's Bank Account?

Credit problems can cause tension between spouses, especially if one spouse has bad credit. Bad credit can lead to numerous problems, including garnishment of the couple's joint bank account. Garnishment allows a debt collector to freeze the joint bank account while withdrawing money for an unpaid debt. The spouse with good credit becomes an innocent victim because garnishment laws allow debt collectors to freeze joint accounts even if only one spouse is responsible for the debt.

Accounts

Couples concerned about one spouse's bad credit should maintain separate checking accounts. They may also consider a third checking account owned jointly for shared expenses. This protects both spouses, even though it may be inconvenient. The spouses would have access only to the joint account and their respective individual accounts, making it difficult or impossible for either to access all three accounts in an emergency.

Judgments

Separate accounts provide important protection from lawsuits. Debt collectors for credit card companies sometimes sue after other collection efforts fail. Lawsuits often lead to judgments, a legal decision ordering a debtor to pay money. Debt collectors who prove their case in court are virtually guaranteed to win judgments, according to Illinois Legal Aid. People who are sued for unpaid debts have virtually no reasonable defenses, unless they can prove identity theft and argue that someone else incurred the debt.

Garnishment

After winning a judgment, debt collectors can ask the judge to allow garnishment. A legal order is issued if the judge agrees, with banks required by law to freeze accounts bearing the name of the person in the garnishment order. Banks are not required to notify account holders that the account is being frozen.

Bounced Checks

Some people do not learn about the garnishment until checks bounce or they are unable to use their debit cards. Once the account is frozen, account holders may only make deposits. They may not write checks or access the account in any other way. A spouse who was not the subject of the garnishment order could ask the bank to start a new account for her use only. She would not be allowed to access any money currently on deposit in the frozen account, but could redirect her direct deposit paycheck to the new account.

Solutions

Some people with frozen bank accounts file for bankruptcy to end the garnishment. All forms of personal bankruptcy prohibit garnishment while bankruptcy proceedings are ongoing. Debt settlement negotiations with the debt collector can also end garnishment.