Joint bank accounts are common among married couples, families, or those who help elderly relatives manage their finances. But what happens when one person on the joint account declares bankruptcy in Indiana?

Just because your name is on the account does not mean that you own all the money in it. However, joint accounts could be problematic in a bankruptcy case when figuring out how much money actually belongs to you.

Joint accounts need to be disclosed

In a bankruptcy case, debtors need to disclose their financial situation in great detail. Typically, a debtor needs to list all accounts where they have an interest, including joint accounts. The fact that there is another person on the account does not mean that the account isn’t relevant to your bankruptcy case. 

When a debtor files for Chapter 7, a bankruptcy trustee reviews their property to find any nonexempt assets that may be available to creditors. Therefore, the ownership of the money in a joint account becomes a key issue.

Who owns the money in the joint account?

There is a special rule in Indiana that could be very helpful in establishing the ownership of the money in the joint account. While alive, joint accounts are owned in proportion to the net contribution by the parties unless there is clear and convincing evidence that their intent was different. 

Let’s assume that you have a joint checking account with your parents. Your parents put $10,000 in the account. You put in nothing. The fact that your name is on the account does not necessarily mean that you own half or all of the $10,000.

It’s important to have documentation proving where the money in the account comes from. This includes bank statements, your payroll deposits, your benefit records, and other financial documents that can help establish the contribution of each party to the account. 

What if you share the joint account with your spouse?

The same issue emerges when spouses share checking or savings accounts. If one of the spouses files for bankruptcy, it may be necessary to evaluate the ownership interests of each spouse.

This is especially important in Chapter 7 because anything that is considered the debtor’s property may become part of the bankruptcy estate, and therefore available to the creditors depending on the applicability of exemptions. On the contrary, anything that belongs to someone else is not considered the debtor’s property.

Don’t withdraw money before filing

If you are worried about a joint account, the first thing you want to do is withdraw the money from it or transfer it to somebody else before filing. You should know that this can cause more problems than it solves. 

Filing for bankruptcy requires disclosing your financial situation in detail, and this includes information about some transactions that were done prior to filing. Simply withdrawing money to keep it away from the bankruptcy trustee can cause legal problems and consequences. 

Instead, consult with an Indiana bankruptcy attorney before doing anything with your joint account.

Consult an Indiana Bankruptcy Attorney Today

A joint account does not mean that every dollar in it will be used to pay off your debts. But it may be necessary to determine the ownership interests carefully. This includes your contribution to the account and the source of the money. It may also qualify under Indiana’s bankruptcy exemption laws. 

Chris Arrington can help you determine how to handle your joint bank account when filing for bankruptcy. Call our office today to schedule an appointment, and we can begin reviewing your case immediately.