Now and then questions arise during a bankruptcy case regarding bankruptcy and joint accounts. For instance, a young man may be a joint account holder on his grandmother’s account in order to aid her in her banking needs. The money in the account is the grandmother’s: her savings and her day-to-day funds. It’s everything she has. The grandson doesn’t deposit money of his own into the account. He simply handles bank deposits and withdrawals and any clerical errors, etc. on his grandmother’s behalf because she is not well and benefits greatly from decreased stress. In fact, she spends most of her time in her own home. The grandson is charged with handling her affairs, making sure her bills are paid and carefully using the funds to make sure she has everything she needs. In the event that the grandson in this hypothetical situation decides to declare bankruptcy, what happens to that joint bank account?
Does that joint bank account become just one more asset available to the bankruptcy trustee to appease creditors listed in the bankruptcy? In many cases, the funds in the joint account would have a balance too high to qualify for exemption through bankruptcy law. (If it did qualify, being exempt means that it would be safe/protected from creditors during the bankruptcy.
Individuals who fear filing because this situation is somehow evident in their life, can set that worry aside. According to California Probate Code, “An account belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each, unless there is clear and convincing evidence of a difference intent.” What that means for Californians who need to file bankruptcy without damaging that “joint” account that isn’t theirs is that …they won’t. If all the money in the joint account came from one of the two joint account holders, then according to California law, all the money belongs to the one account holder who made all the contributions. In other words, the money doesn’t become the grandson’s simply because his name is on the account.
Having said that, there is a commingling/transmutation issue that could occur if the usage of the funds in the account could be said to benefit the “grandson.” In other words, the money in the joint account could be considered an asset of the debtor’s estate if the debtor was using the money in the account for his or her own use. Using the money for his/her own use results in the joint account being transmuted to an asset of the debtor. If the debtor never touched the money for his or her own personal use, then it should be safe throughout the bankruptcy process.
If you have additional questions about how filing for bankruptcy in southern California will affect your life and the lives of those around you, please contact the bankruptcy attorneys at Westgate Law. We provide experienced guidance through chapter 7 or chapter 13 bankruptcies so you don’t have to worry about the technicalities of the California bankruptcy law.