The Minnesota Court just decided a case on a number of questions regarding a creditor’s ability to garnish a jointly held bank account when one of the account holders is not liable on the judgment which underlies the collection effort. The case was a Certified Question from the United States District Court, District of Minnesota that went the Supreme Court of Minnesota to decide the following issues.

First: “May a judgment creditor serve a garnishment summons on a joint account to satisfy the debt of an account holder when not all of the account holders are judgment debtors”? Answer: The court found that Minn. Stat. Sec. 524.6-203(a) does not limit a judgment creditor from serving a garnishment summons on a garnishee (bank usually), and attaching funds in a joint account to satisfy the debt of an account holder, even though not all of the account holders are judgment debtors.

Second: If the answer to the first question is to the affirmative the next question is “Is it the judgment creditor or the account holders who bear the burden of establishing net contributions to the account during the garnishment proceedings”? This is a germane question as the Minnesota garnishment statute states that a garnishment summons only pertains to money that is “due” or “belonging” to a debtor. Obviously this is problematic when the debtor has co-mingled funds with a non-debtor and a garnishment summons is served and all the funds in an account are attached for the garnishment. Answer: The court found that the burden of establishing net ownership of contributions to a joint account holder in a garnishment lies with the account holders and NOT the garnishing creditor.

Third Question: What applicable presumptions regarding ownership, if any, apply in the absence of proof of net contributions? (good question) Answer: The court, unfortunately for our side…., decided that the presumption will be that the judgment debtor is initially, but rebuttably (meaning, of course, that presumptions can be argued against and overcome), presumed to own all the funds in the joint account.
The court didn’t go into any great detail about what exactly the circumstances are for rebutting the presumption of ownership in the account funds by the judgment debtor would be but that should be a fairly easy exercise especially these days with the standard practice by banks imaging checks and whatnot that are deposited into accounts. Cash deposits though…tougher row to hoe with that one.

Moral of the story…………if you owe people money don’t merge your funds with anyone else’s money in a joint account. Not even your kids for a minor custodial account…we’ve seen problems with those too. If you are not a judgment debtor…don’t open an account with someone who is or you may get a nasty surprise when one of their judgment creditors executes on your funds and then you’ve got a battle on your hands to get it back.