Can a Debt Collector Garnish a Joint Bank Account?

The idea of a debt collector having a levy against your bank account (called “garnishment” by some) is stomach-churning. However, if a debt collection agency obtains a judgment against you in court, they can freeze your bank account and take funds out of it. However, if you have a joint account, three factors impact their ability to grab the money:

• The state where you reside.
• The relationship between the account holders.
• The source of the funds.

Can a creditor garnish my spouse’s bank account?

Where you live and the relationship you have with your joint account co-signer in large part determines whether or not your joint account can be levied by a debt collector. Generally speaking, if the joint account is held by you and your spouse and you live in a community property state, then a debt collector can garnish your joint bank account. Going one step further, because debts incurred in community property states are the responsibility of both spouses, the debt collector can also garnish your separate bank account for your spouse’s debt (except in Texas). Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

If you and your spouse have a joint account and live in a separate property state (also known as a common law state), the type and amount of garnishment varies by state. For example, in some states the debt collector can only garnish up to half of the balance of a joint account. Other states require that the item or property purchased that originated the debt benefit both spouses or their family in order for a debt collector to garnish the joint bank account.

In Lewis vs. House, the Supreme Court of Virginia ruled, “Only half of the funds deposited in a joint bank account of a husband and wife is subject to garnishment by a creditor of one of the owners.” In that case, the creditor argued that, because either Mr. or Mrs. Lewis could withdraw all of the funds from their joint account, the person holding the judgment could garnish the entire account. The Virginia court interpreted that the intent of Virginia lawmakers was “to place a husband and wife in a position more favorable in relation to creditors than that of other joint depositors by providing a presumption protecting from creditors one-half of their joint funds, regardless of the amount of contributions made by each to the account.”

What about a joint account I have with my parents?

People often add others to their bank accounts as a matter of convenience. Your name may be on your parents’ account so that you can do their banking for them. Your sister’s name may be on your bank account because you’re single and want someone to have access to your account in case the unthinkable happens. Yet, depending on where you live, having another person on your bank account can lead to a debt collector’s levy against that account.

As with married couples, there are some states that prohibit garnishment of more than fifty percent of the balance of a joint bank account. Others allow levies for the full account balance.

If your parents’ account is being garnished for a judgment a debt collector has obtained against you, in many states it’s possible to reverse the levy if you can prove that you didn’t contribute to the account. For example, you can show that the sources of all of the deposits were your parents’ pension benefits, Social Security payments, and the like. You can provide paperwork that demonstrates that your parents were initially the sole owners of the account, and then added you as a signatory later. And, you can show that all of the withdrawals were for your parents’ benefit, and not for your expenses.

Other limits to joint account garnishment

In addition to some states having a 50 percent limit on the amount of money that can be garnished in joint account, some state and federal laws limit the kinds of money that can be garnished. Generally speaking, federal and state benefits – like Social Security, disability, and unemployment insurance – are exempt from garnishment.

Case citation

Lewis vs. House, 232 Va. 28 (1986), 348 S.E.2d 217