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Joint bank accounts are a common financial tool for couples, families, and business partners in Canada. They offer convenience and shared financial responsibility, but they also come with potential risks, especially when it comes to debt collection. A pressing concern for many Canadians facing financial difficulties is whether a joint account can be garnished. This article delves into the complexities of joint account garnishment in Canada, providing crucial information for those navigating this challenging situation.
Table of Contents
What is a Joint Account?
A joint account is a bank account shared by two or more individuals, with each account holder having the right to deposit, withdraw, and manage the funds. These account holders are often referred to as joint owners or co-owners of the account. While all joint owners have full access to the account’s funds, the legal ownership of those funds can be more complex, especially when it comes to creditors’ claims.
What is a Garnishment?
Garnishment is a legal process where a creditor can collect money directly from a debtor’s bank account or wages to satisfy an unpaid debt. This process typically requires a court order, which names the debtor and the garnishee (the bank or employer holding the funds).
Garnishments can take two primary forms: wage garnishments, where a portion of the debtor’s salary is withheld, and bank account garnishments, where creditors attempt to garnish funds directly from the debtor’s account.
In most cases, a creditor must obtain a judgment order from a court to obtain a garnishment order. One exception is the Canada Revenue Agency (CRA), who can garnish assets without notice.
Can a Creditor Garnish a Joint Account?
The question of whether a joint account can be garnished in Canada is complex. One of the key complications arises from the co-mingling of funds in joint accounts. This means that money from different account holders and different income sources (such as wages, pensions, disability benefits or other forms of income) are mixed together in the account. Over time, it becomes increasingly difficult to identify the source of specific funds (even if they are exempt from garnishment) or to determine which joint owner those funds belong to.
Even if creditors don’t automatically have the right to seize money from all co-owners in a joint account, the commingled nature of the funds can make it difficult to protect the non-debtor’s share of the money.
In practice, once a bank or financial institution receives a legal garnishment notice from a creditor the bank may either take the money from the account for the creditor or freeze the entire account pending further determination of who legally owns the funds. A bank account freeze means you can’t withdraw or transfer money out of this account. This means that joint account may indeed be affected, even if only one joint owner owes money to a debt collector.
Need to stop creditor actions?
The non-debtor co-owner has the right to dispute the seizure and attempt to reclaim their share of the funds. However, this process can be complicated and may require legal assistance. Meanwhile, your access to funds in your joint account is still affected. The best time to object to the seizure of a joint account is when your creditor sues and takes you to court before they obtain a garnishment order.
Given these complexities, individuals with joint accounts should be aware of the potential risks, especially if one co-owner has significant debts or tax liabilities. It may be advisable to maintain separate accounts or to keep clear records of fund sources to help protect against potential garnishment issues.
Seeking Professional Help
If you have multiple debts and creditors, it may be time to explore debt solutions, such as debt consolidation, credit counselling, a consumer proposal or bankruptcy.
Only a legal process like a consumer proposal or bankruptcy can stop a creditor from garnishing wages or a bank account.
A Licensed Insolvency Trustee can provide personalized advice on your financial situation and help you explore all available options for debt relief.
At Hoyes Michalos, we understand the stress and uncertainty of dealing with financial difficulties. Don’t let the threat of garnishment paralyze your finances – contact us for a free consultation
