Are your mother's bank funds safe from your creditors?

If you share an account with mom, be prepared to prove which funds are hers

By Tanisha Warner

Credit Care

Tanisha Warner is the communications manager for Money Management International, where she manages educational content designed to teach consumers about personal finance topics. She writes "Credit Care," a weekly reader Q&A about debt issues, for CreditCards.com. Ask a question 'Credit Care' archives

Dear Credit Care,
Can a finance company come in and take money that is not mine from my mother's account because I am a signer on her account? All the funds are my mother's retirement deposits. -- Keleen

Dear Keleen,
In order for anyone to levy a bank account and remove funds, the bank must first receive a garnishment order from the court. To receive a garnishment order, a creditor must sue the person who owes money in court and be granted a judgment for the amount owed. The judgment may then be used to obtain the garnishment order.

So if you have received notice from a creditor that you are being sued for a debt and the debt is valid and owed by you, it is possible that the creditor received a judgment and may proceed with a garnishment order for any bank account that they have reason to believe contains your funds.

You said the account in question contains only funds that belong to your mother. That's important because your creditor is not entitled to any funds unless they were deposited by you. However, a garnishment order may cause the funds in your mother's account to be frozen until she can prove that all the funds in the account belong to her and none belong to you.

I'm sure you would like to avoid any problems with your mother's bank account, if possible, and the best way to do so may be to hire an attorney. The laws and rules affecting garnishment vary by state, so to know for sure how your mother's account could be affected, you might want to consult a professional.

I do have one bit of good news to share with you. A 2011 federal regulation protects bank accounts from garnishment if they contain federal benefits. Under the regulation, when a bank receives a garnishment order, it is required to review the account for automatically deposited federal benefits, including payments from Social Security, Supplemental Security Income, Veteran's Affairs, Railroad Retirement, Civil Service Retirement and Federal Employee Retirement.

That review period must cover the previous two months, beginning no later than two days after the garnishment order is received by the bank. Any automatically deposited federal benefits deposited during the review period must be protected from garnishment. For example, if your mother's account  receives $2,000 per month in Social Security benefits, the bank would have to protect $4,000 from garnishment. If the account balance at the time of review was more than $4,000, any amount over the protected amount might be eligible for garnishment.

The best way to assure that your creditors don't get their hands on your mother's bank account is to pay what you owe or make arrangements to pay what you owe through a monthly payment plan. If you do not have any income to pay your debts, let your creditors know that and consider contacting a bankruptcy attorney to have your debts forgiven in a Chapter 7 bankruptcy filing. Also, unless it is imperative that you be able to sign on the account, you might consider removing your name from your mother's account.

Handle your credit with care!

Tanisha Warner is the communications manager for Money Management International, the largest nonprofit, full-service credit counseling agency in the United States. She manages educational content designed to teach consumers about personal finance topics. You can find more money management advice on Blogging for Change and MMI's Facebook page.

Credit Care answers a question about a debt or credit issue from a CreditCards.com reader each week. Send your question to Credit Care.

Published: February 20, 2012

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