Our previous post discussed some creative ways to enforce judgments (such as seizing the contents of a debtor’s safe deposit box) and alluded to the challenges of taking such actions when the account is owned jointly by the debtor and non-debtor. In this article, we describe in more detail how a judgment creditor can attempt to satisfy a judgment against a debtor from assets held in a joint account when the creditor only has rights against one of the owners of the account.
As you can imagine, attempting to enforce a judgment with assets that are owned or controlled jointly between a debtor and non-debtor can be complicated. However, the courts have set up a procedure to address this exact scenario. If a creditor restrains or seeks to enforce a judgment against an asset — including cash, stock, jewelry or other personal property, etc. — the joint owner who does not owe money to the creditor has the right to receive notice of the creditor’s restraint of the account and to fight for his or her share of the assets in court. The following examples illustrate the complexity of this task.
A husband and wife share a joint bank account with $50,000 that has been restrained due to a judgment against the husband. The wife receives notice of the restraint placed on the account and makes a motion to the court asking the court to release the money in the account that belongs to her. The court would then try to determine what portion of the money in the account was deposited by the husband and what portion was deposited by the wife, most likely by reviewing monthly statements for the account and eliciting testimony from the husband and wife. Once the breakdown of the deposits is clear, the creditor would then be allowed to take only the husband’s portion of the account.
A husband and wife own a house jointly in both of their names, which the creditor attempts to sell in order to satisfy the judgment. First, if the sale were allowed to proceed, the creditor could only recover, at most, the husband’s share of the proceeds from the sale (likely half). Second, the court can, and likely would, prohibit the creditor from selling the house in order to protect the non-debtor. Instead of forcing a sale of the house, the creditor would receive a lien on the property, which would allow the creditor to be paid from the husband’s share of the proceeds when the house is eventually sold.
Two friends own an investment property in equal shares as tenants in common, but the judgment is only against one of them. In this case, the court would likely allow the creditor to sell the debtor’s share of the property. The creditor would replace the debtor and become a 50% partner with the non-debtor in the property, and enjoy the same rights and privileges that the debtor once had.
Essentially, when a creditor attempts to satisfy a judgment with assets owned jointly by a debtor and non-debtor, the non-debtor will have the right and opportunity to persuade the court that his or her rights to the property should be protected, even if it would infringe on the creditor’s rights to satisfy the judgment. Ultimately, the court has wide discretion to decide these matters in a way it deems fair, but its decision often rests on where and how the assets are held, the relationship between the debtor and non-debtor, what rights the non-debtor has to the property, and any proof the non-debtor can provide to the court regarding his or her rights to the property.