In Bankruptcy, How Do I Treat My Mother’s Checking Account if I am Listed Jointly as a Signor?

A review of the true nature of the relationship a person has to another’s checking account is in order to determine how that account might be treated under a Bankruptcy filing.

If the bank account truly is a joint account, then each owner has the ability to utilize the funds in the account and each owns an undivided one-half interest in the money contained in the account.

A joint account must be distinguished from an account listed in the name of just one person, but another person is authorized by the account owner to be a signatory on the account. In a ‘second signor’ situation, the account would be owned by the person in whom the account is named — and merely being an authorized signor would not create ‘ownership’ in the account.

From a practical standpoint, Trustee’s look to the specific facts of any Bankruptcy case — and the scenario described here is not uncommon.  The bankruptcy trustee may look to see where the money in the account originated; whether any withdraws were made by the potential debtor; if the potential debtor wrote checks on the account, etc.

If the account is truly jointly owned, the debtor should list the account where appropriate on the petition and schedules.

The debtor may also indicate something like: “The account is listed under my mother’s social security number and I don’t receive any year-end tax reporting on her account and every penny in this account is hers and I have not used or deposited any funds into her account.”

Finally, if one would seek to take one’s name off a bank account, he or she must look to federal and state law to determine how long he or she must wait to file bankruptcy.  If the issue is that the trustee would consider the account transferred from the debtor to the family member, then the federal law against making “fraudulent transfers” would apply a two year period of time, while the state law could be four years or more.

For detailed instructions on how to file pro se (self help) bankruptcy without the need for an attorney, see Standard Legal’s Bankruptcy legal forms software.