Many people have joint bank accounts, whether they are with a spouse, a partner or a family member, usually a minor child. When all is well, the division of the account is not a matter of great concern. However, when finances become strained and one of the parties in the account finds themselves in a dire economic situation, the partitioning of a joint bank account can become a serious matter. If a party in a joint bank account decides to file for bankruptcy, the other party will rightly be concerned about how the courts will view that asset.
Nebraska law regarding joint bank accounts is covered by Neb. Rev. Stat. § 30-2722. Under the statute, the account belongs to the parties in direct proportion to the net contributions made by each party. Net contributions are the total contributions made to the account by or on behalf of a party that have not been paid out to another party less any deductions from the account and including any interest or dividends on the account. Deductions taken from the account are things like account fees.
An example of this would be as follows:
Jane and Sam have a joint account.
Jane deposits $100.
Sam deposits $200.
Jane’s sister deposits $100 for Jane’s use.
The fees on the account are $50.
The interest on the account is $10.
Jane’s contribution is $200 less her share of the fees, which would be $25, giving her $175, and adding on her share of the interest, which would be $5, giving her a net contribution of $180. Sam’s net contribution would be the same, since they both had equal shares.
If Jane files for bankruptcy, her share of the joint account would be $180, since that is her net contribution. Her creditors would not be able to go after Sam’s share of the account, unless they were able to show, through clear and convincing evidence, that the apportionment of the proceeds was other than what is shown. Nebraska courts have ruled that because of the specificity of the statute, there must be clear and convincing evidence that there was an intent that apportioned the account in a different manner. The joint account statute also applies in a garnishment situation – when the bank account was garnished by Jane’s creditor prior to her bankruptcy, if a hearing had been requested before all $360 in the account was delivered to the creditor, Sam would have been able to keep his $180 in the account.
There is the opportunity for bankruptcy fraud in the use of a joint account. This is a situation where, when there is a joint account, the person who is filing for bankruptcy takes himself off of the account just before filing. If the court finds this behavior suspicious, it may choose to consider the funds in the account as assets to be considered in the case.
Do not attempt to use a joint account as a means of hiding your assets. If you suddenly open a joint account with your friend, but all of the contributions were made by you, the court would use the formula from the statute to determine how to apportion the account funds for the purposes of the bankruptcy filing. This means that your funds will still be considered your funds and would be considered assets that the court could use to settle the debts you have incurred, unless you have enough exemptions left to protect these funds.
In all cases, the court will do its best to determine who has provided what assets to a joint account and from there, determine how those assets are best utilized in the settlement of your debts. If you have questions about filing for bankruptcy in Nebraska, contact our Broken Bow, NE bankruptcy attorneys today at 308-872-8327.