17 Mar My Husband Or Wife Is Filing A Bankruptcyâ€¦ How Will It Affect My Bank Account
If your husband (for example) files a bankruptcy, and you have bank accounts in your name only, there should be no affect on your accounts.
However… if the money deposited in your account really belongs to your husband (for example, if his paycheck gets deposited into your account), then it is possible that the Chapter 7 trustee in his case could take the money from your account and apply it to your husband’s creditors. Similarly, if he sold an asset belonging to him (say a car), and put the proceeds into your account, or if your joint tax refund was deposited into your bank account, his Chapter 7 trustee could take his portion of the funds. Even if you spent all the money in your account by the time the trustee got around to asking the questions about it, but it was there at the time the bankruptcy was filed, the trustee can go after you to recover the money. And keep in mind that even if he has the right to claim an exemption to money, if he didn’t claim the money in your bank account as exempt, he may not be able to claim the exemption after the trustee starts looking into it.
What if you put your money into his bank account, and at the time he filed his bankruptcy there was a balance of funds that really belonged to you, could the trustee take your money? He or she could sure try. You would then have the burden of proving that it was really your money, which sometimes is not as easy as you might think.
What if there was money in a joint account when he filed his bankruptcy…could the trustee take it? It depends, but many trustees would take the position that at least half of the money was your husband’s, and subject to the trustee’s taking. Of course, if he could claim an exemption in the funds, it would be protected.
What about a bank account you have for your children, can that be taken by the trustee? It depends. If the account is properly set up as a trust account for the kids, or for the benefit of the kids, the account is probably safe. But if the account is listed as being owned by your husband, or by the two of you, then the trustee may try to go after the account.
Another issue that sometimes presents a problem is if your husband’s parents put his name onto their bank account in case something happens to them. Some trustees would take the position that your husband is the owner (or at least partial owner) of the account, and try to take the funds.
Keep in mind that the results would be different in a Chapter 13. Even if a Chapter 7 trustee would try to claim funds, if the case had been filed as a Chapter 13, the Chapter 13 trustee would not take the funds, but would insist that your husband’s unsecured creditors get at least as much through the Chapter 13 as they would have received if the case was a Chapter 7.
Next: How your spouse’s bankruptcy affects your personal property.
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