Opening Credits

Minor’s co-signed bank account at risk of parents’ garnishment

Opening Credits columnist Eric Sandberg

Erica Sandberg is a prominent personal finance authority and author of “Expecting Money: The Essential Financial Plan for New and Growing Families.” She writes “Opening Credits,” a weekly reader Q&A column about issues for people who are new to credit, for

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QuestionDear Opening Credits,
I am a minor and have to have my parents co-sign on my bank account, even though it’s my money that I earned myself. Because of my parents’ debt, can my wages in the state of California be garnished? – Bluebird


Dear Bluebird,
Because you have either a checking or savings account that your parents helped you open, they are the co-owners. This is a common scenario. Unless you were formally emancipated, an adult would need to be part of such an arrangement since minors can’t enter into legally binding contracts.

Unfortunately, it appears your parents are having some financial problems that are now affecting you. Presuming there has already been a lawsuit for an unpaid debt, and they lost the case, it is possible that the judge will allow the creditor to collect what’s due by claiming allowable wages and property. For example, if your parents are working, they may experience a wage garnishment where a portion of their paychecks are attached and sent to the creditor. If they have assets that can be claimed and sold, the proceeds will be sent to the creditor. Some may be tangible items, such as a car or valuable antiques. However, what is most desirable to a creditor is plain old cash that is held in bank accounts. It’s easiest to take. Your account would be a tempting target.

To understand just how at risk your money is, I reached out to Aurora Dawn Harris, a consumer protection lawyer who specializes in debt defense and  practices in California.

State laws have a lot to do with how this might play out. In some states, the creditor is allowed to take up to 50 percent of what’s in a co-owned account, while in other states the creditor can swoop in and take every penny. Technically, all the assets you have in the account might be at risk, says Harris. “Here they can grab 100 percent of it, if the parent who was sued has their Social Security number on the account.”

I’m sure this is a scary prospect, but there are things you can do, such as ask your mom or dad to file a third-party claim of exemption on your behalf. “They need to say this is separate money and to ask the bank to provide a statement that this is a guardian account,” says Harris. “The main thing is to convince the judge, who will want to see money going in, payments, statements. Frequently the creditor will drop it.”

Now, all that is assuming your parents have already been sued. If it hasn’t happened yet, there is nothing wrong with taking your money out of the account. If you withdrew the cash and the creditor found out later and tried to go after it, you shouldn’t be the person they pursue. You’re a minor, after all.

I don’t get the sense there would be any big repercussions if you withdrew the money and tucked it away in a safe space. However, to get a more definitive answer, I urge you to call the National Consumer Law Center at 617-542-8010. It’s time for a long, detailed conversation with a professional who can guide you to the correct decision.

Meanwhile, I want you to have a candid conversation with your parents about what’s going on. They should be protecting you from their mistakes, not putting you in the middle. Voice your worries, let them take the full fall. This is not your responsibility. In the event that they are not the type of people to go to because you’re certain they won’t be helpful, turn to another adult who can step in on your behalf.

I’m so sorry that you are in this spot. I wish you the best and please keep me updated.

See related:More parents giving their kids credit cards

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