Monday, September 27, 2010

Inconvenient Convenience Accounts: What happens to a Joint Bank Account in Bankruptcy?

What is the effect of having your name on a joint bank account if you later file for bankruptcy?

Sometimes it just makes sense to give a trusted friend or family member access to our bank accounts. Commonly referred to as "convenience accounts," this often happens when parents wish to give their adult children the authority to take care of their affairs as they age by putting their child's name on their bank accounts. If that child later files for bankruptcy, a bankruptcy trustee might view the account as being the child's property, meaning that all or a portion of it may be at risk of being seized in bankruptcy proceedings.

In determining whether a convenience account is an asset which may be seized in a bankruptcy proceeding, courts will look at whether the original account holder intended to make a gift of access to the account or rather for their own convenience (so that an additional person could merely write checks to pay for the original account holder's bills), and the extent to which the additional person exercised ownership of the account (in other words, did he or she use the funds from the account for personal expenses, or was his or her use consistent with the original account holder's intent?). The law presumes that adding another person onto a bank account is a gift, which means that it can be difficult to convince a court that the additional person was added to the account for convenience, and the account should not be considered an asset to be seized in a bankruptcy proceeding.

The easiest way to avoid this risk is to execute a Durable Power of Attorney. This still allows for another person to write checks from your bank account should the need arise, and doesn't risk a bankruptcy trustee seizing your personal savings if your child files for bankruptcy.

If you need help weighing your options, contact Attorney Matthew Trask or call 508.655.5980 to schedule a one-hour consultation.


  1. Great post, Justin! Convenience accounts of this nature are really another form of DIY estate planning and are frequently a bad idea because of a host of routine yet unintended consequences like the one you describe here. A Durable Power of Attorney is a great idea for convenience and it will survive the account-owner's incapacity, but it will not survive his death.

    Naming someone you trust as a co-trustee of a trust instead enables him to assist you for convenience now and also to step in and manage then wrap up your affairs upon your disability and/or death. People should be sure to ask their estate planning attorneys about the best way to handle their particular situations.

  2. Should an account in which a debtor is only a power of attorney be listed in the schedules as an asset? How do you handle this in a chapter 7?

  3. In response to "Anonymous", accounts which are held as a "power of attorney" are different from convenience accounts in that there is a clear legal obligation to manage those funds on behalf of the true owner. As such these would not be listed on your schedules as an asset in a Chapter 7 bankruptcy, but would still be disclosed on the Statement of Financial Affairs Question #14, which asks you to "List all property owned by another person that the debtor holds or controls."


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