Reader Question About Joint Bank Account

I received an email from a Blog reader who asked me to post and answer the following question. Although I do not often post questions (usually because they are too long) this one is precise and interesting:

“My son (John) lives with and supports a woman (Mary) and their young children in Florida. Recently, SunTrust setoff $8000 from a bank account they jointly own for an old deficiency amount debt on a car loan in Mary’s name alone. The monies in the account are from John’s earnings. I know they cannot rely on tenants-by-entirety protection. Does the Head of Household prevent this set-off like it would a garnishment?”

The reader correctly points out that the bank account is not tenants by entireties because her son and Mary are not married; only married people can have entireties property. The money in the account may be protected from John’s creditors as John’s earnings because the question states that John supports Mary and their children. John is head of household, and earnings of a head of household are protected by Florida statute even after deposited in a bank account. However, John’s earnings in the account are protected only from own John’s creditors under the Florida statute earnings exemption. The earnings have no exemption from Mary’s creditors.

The joint account presumably is owned equally by John and Mary. Mary’s creditor correctly garnished the account and is entitled to Mary’s interest, if any, in the account funds. If John and Mary show to a court that John deposited all the money in the account, as the question states, a court may dissolve the garnishment. The creditor could argue to the judge that even if John put the money in the account, when he did so he made a gift of 50% of the money to Mary by virtue of this being a joint account. If John did gift half the money to Mary the money gifted would thereafter lose any protection as earnings of a head of household. Mary’s ability to write checks from the account supports the creditor theory that John has gifted half of the money to Mary.

The question states that SunTrust “setoff” the money. A setoff is not a garnishment. The question does not state the name of the car creditor. If SunTrust made the car loan and holds the deficiency judgment against Mary then SunTrust may have other grounds to claim the money in the account. The bank’s account agreement or car loan agreement may give it, the bank, setoff rights to recoup any car loan deficiency from money in the account at the same bank.

These people will need an attorney to sort this out. If SunTrust is not the car creditor I still think the car creditor has the strongest argument under these facts based on an implied gift by John to Mary of 50% of John’s deposited earnings.