How does bankruptcy affect a joint account holder?

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Someone who shares signing authority with you is not liable, simply for that reason, for your debts. Your interest in a joint account is an asset of your bankruptcy estate. That doesn’t mean that a Chapter 7 trustee will try to grab all the funds in a joint account, however. You can offer proof that only a certain amount of the money actually belongs to you, or that your name is on the account merely as a convenience to a friend or relative who really owns the account.

Don’t be tempted to use a joint account as a way of putting assets beyond the reach of your creditors. Say you open a joint account with your neighbor Fred. You sell your Porsche and deposit the check. Fred then withdraws the check and buries the money in a tin can in his backyard, right next to the fence. This transaction is a fraudulent transfer, and Fred can be required by a creditor or Chapter 7 trustee to return the payment.

(Reviewed 11.14.08)