Bank Calls Loan By Seizing Money Deposited In Entireties Acouunt At Same Bank By Non-Debtor Spouse

Just because the law protects an asset or an account from creditor does not mean your creditors will not try to levy on the asset or garnish the account. Consider this example reported by a current client. The client, who is married, borrowed money in his own name from a large bank. The bank called the loan and demanded payment in full. The client ignored the call and continued to make timely monthly payments. The client and his wife had a joint account at the same bank. All money in the account was deposited from his wife’s earnings. The wife did not sign the note or any guarantee of the note. Without warning, and without filing a law suit to enforce the note, the bank invaded the account and took all of the wife’s money to pay off the loan.

The bank account is exempt from the husband’s judgment creditors as a tenants by entireties accounts. It is possible that the loan agreement with the bank may have given the bank the right to invade the account in order to pay all amounts due under the loan. The client has to look at the loan papers. Even so, such agreement would not give the bank the right to invade a joint account unless the non-debtor spouse signed the same agreement assuming she did not guarantee the note. This Blog has previously posted examples of large banks invading bank accounts without notice to enforce credit card payments where the credit card agreement gave them such right.

This client will have to retain an attorney to carefully review the loan papers to see if the bank had the right to take the money out of the joint account. If such right was not provided in the loan documents, the client will have to go to court to ask a judge to reverse the seizure. In such event, the attorney could seek damages for wrongful garnishment or breach of the loan agreement.

Before you sign a credit card agreement or commercial loan with a bank make sure you understand what rights you are giving the lender to force repayment. If you bank at the same bank that is giving you money, make sure you are not pledging your bank account balances to guarantee repayment. The best advice is to not deposit where you borrow. Some lenders want to see that you maintain accounts at their bank when you apply for a loan. If you anticipate any default under the terms of the loan (as this client received a demand for payment in full) you should transfer most, if not all, of your funds from the lending bank to another bank. During this recession people who owe money to banks must be vigilant and use common sense to protect their money.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida