Are Joint Bank Accounts Subject to Garnishment?

Garnishment allows creditors and debt collectors to freely withdraw money from joint bank accounts -- even if one of the signers on the account has nothing to with the debt or the garnishment order. Garnishment is the most extreme form of debt collection and is available only after a court order by a judge. A joint account holder becomes an innocent victim as the bank account is frozen and money withdrawn.

Garnishment Process

The garnishment process starts with a delinquent debt. A credit card company or other creditor files a lawsuit in small claims court alleging that you failed to pay a debt. A judge hears the case and sides with the creditor or debt collector by issuing a court order called a judgment. The judgment requires you to pay a specific amount to the creditor or debt collector. If you fail to pay the debt, the collector can ask the judge for permission to garnish your bank accounts.

Banks Can't Help

Banks are required by law to comply with court orders for garnishment, and must give the debt collector access to your account. It simply does not matter that you share the account with a spouse, partner or someone else. Upon receipt of the garnishment order the bank account will be frozen, with you and the joint account holder allowed to make deposits only. Any checks you write will be returned unpaid and your debit cards will be declined. Meanwhile the debt collector is allowed to make electronic withdrawals from the account to pay off the judgment.

Bankruptcy

Garnishment is so serious that it sometimes leads to immediate bankruptcy. All forms of personal bankruptcy offer a provision called an "automatic stay." The automatic stay is a legal order also signed by a judge, and it immediately stops garnishment. However, for the automatic stay to remain in place you must continue with the bankruptcy proceedings.

Alternatives

The best alternative to garnishment is to not allow it to happen. Debt lawsuits should be settled before the court date to avoid judgments. If a judgment is awarded you should immediately contact the debt collector to set up a payment plan. In exchange for your promise to pay, ask the debt collector to promise in writing that your bank account will not be garnished if you make your payments on time.

Protecting Yourself

Garnishment isn't always a slam-dunk for debt collectors. They need your banking information in order to garnish your account, and they generally get that by reviewing their records for previous payments you have made by check. This provides the routing number and account number, which is all they need to find your bank and have the garnishment order delivered. If you are concerned about garnishment you should open new bank accounts and have your name removed from any joint accounts. Once your name is removed from the joint account your spouse or partner will be completely protected against garnishment for a debt that only you owe. Then safeguard your new account numbers by using only cashier's checks to pay debt collectors.

Exempted Money

The Exempt Income Protection Act (EIPA) of 2009 protects bank accounts that contain subsistence funds such as government benefits, pensions, and some earned income. EIPA prevents creditors and debt collectors from freezing these accounts to pay private debts, like credit cards.