What are the rules if we have a joint account?

Posted by Gayla K. AustinJan 10, 20210 Comments

Mr. and Mrs. H. have a joint bank account.  The H's have been married for about 10 years.  There was a  time period when Mrs. H., a pharmacy technician, was unemployed.  During that time period, she had surgery.  At the time, neither of the H's had medical insurance.  The H's still owe the creditor, who has turned the unpaid medical bill over to collection.   The collection company obtained a judgment against the H's.  Now, fortunately, both of the H's are working and are able to pay back some or all of the debt. 

What is the creditor risk in Wyoming when assets are held in a joint account? 

When assets are held in a joint account and one of the joint owners is liable to a creditor, the burden is on the non-debtor owner to prove what funds in a bank account, held jointly by the judgment debtor, are not subject to execution.  Execution means a garnishment against their bank account, or a lien on their real property.  This has been the law in Wyoming since 1987, in a case called Hancock v. Stockmens Bank and Trust.   Simply showing the source of the deposits is insufficient to meet the burden of proof--there must be a full tracing of both deposited funds and disbursements.  This is based on a the Wyoming case F&S Diversified Services v. Taylor, a 1995 case. 

What did the joint owners of the bank account do to avoid paying additional costs pay or avoid an ongoing judgment? 

In this case, I contacted the collection company for my clients and we worked out a settlement.  The H's paid a negotiated amount to the collection company.  Because we made settlement with the collection company, neither one of the H's bank accounts were garnished.  This avoided a significant amount of interest and other fees for both of the H's.  The H's paid the collection company a negotiated amount.   As part of the settlement, the judgment against the H's was satisfied and the negotiated amount due was paid in full.  In this case, settlement of the judgment is a better outcome than garnishment of the H's bank accounts over time, and the H's avoided a lien on their home. 

For more details on how to own your joint bank account, this link explains the best way to own your account, for estate planning, and to protect your accounts from creditors. 

A conversation with an experienced attorney is recommended to determine how to own your account.  Please call 307.200.1914 for a telephone or video conference--it's free.