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One of the things that we often deal with in bankruptcy is the joint bank account where
one of the parties listed on the bank account is not filing for bankruptcy. This can come
in many different situations.
Very often our client comes in and says that while they are on the title to their son’s
car, they didn’t make any of the payments. Any payments made were made by the son. The
only reason that they were on the title is because at the time the car was purchased
the boy was a minor. And therefore they had to be listed on the
title. But they don’t have any money in the car and they never used the car.
The other example is bank accounts somebody might have a bank account and they list another
family member, a father mother sister or brother jointly on the bank account so that if something
happens to them there’s someone to step right in who has authority to write checks
to pay bills as they become due. The question then becomes how is something like that how
is that property treated in bankruptcy.
As a general rule, you might say well the asset is owned fifty-fifty. That doesn’t
always apply. Because the situations that we always run into and let me use the bank
account example. We had a case recently that a lady had a bank account, her husband passed
away, all of the life insurance proceeds went into the bank account. At the bank’s suggestion,
she listed her brother who lived in another state as a joint signer on the account so
that if anything happened to her he could step in and take care of the day to day needs.
A couple years later the brother who’s completely forgotten about the bank account, files bankruptcy
doesn’t even list the account because he’s forgotten about it, and then in the course
of the bankrupty it comes to light and the trustee says well it’s a joint account so
the trustee is after half the money.
And at the time of the bankruptcy filing there was $140,000 in the account. We ended up being
retained by the sister who was not filing bankruptcy who had deposited all of the life
insurance proceeds into that account.
We were able to defeat the trustee’s claim on the basis of what we call a resulting trust.
And we established that the brother who filed bankrupty he didn’t put any money into the
account he never took any money out of the account. He never even had possession of any
checks if he wanted to take money out of the account. He had forgotten what bank the account
was even located in and it didn’t even come up until after he filed bankruptcy.
And in Florida law, the courts have held that in that situation the brother holds what the
law calls bare or legal title in trust for the sister. And they have no equitable interest
in the assets, of the account. So all of the account belongs to the sister and the brother
filing bankruptcy had zero interest in the account and the sister was able to keep all
of those funds.
What we will generally do is if we recognize a situation like that before filing bankruptcy,
we go ahead and suggest that one or the other be removed from the account so that we don’t
have to deal with that issue going through bankruptcy. Again, this is another one of
these areas where it might sound simple but the devil’s in the details and it can be
very complicated if you have any situation like that seek professional advice.