Closing Bank Accounts - Potential Risk to Daughter's Account?

[SilverQT]

First - what an amazing forum. The level of support and information here is so helpful. I have been reading and absorbing for a few weeks and am so impressed with and appreciative of everyone's contributions. Here goes my first question...

One of the many little steps I am taking on the path to filing BK 7 under the advice of my attorney is to close my Wells Fargo Bank checking account in advance of defaulting on the cc debt with them. I have also been a cosigner on my daughter’s WFB savings since it was opened a few years ago to facilitate transfers to her. She is now 21, in college, still a dependent of mine (2011 is the final year for that). She also has a checking account with WFB on which I do not sign. I have instructed her that she will need to close the savings account to avoid risk of having the funds seized due to my being a cosigner. Her first preference is to just close the old account, if need be with the explanation that she is no longer a minor and simply wants the account all to herself, and to open a new savings account with WFB in her name only. Having both the checking and savings accounts at the same bank help her to avoid fees by meeting the minimum balance requirements. Is it safe for her to close one savings account and then open another at WFB on which I do not sign, or should she go to another bank entirely? I cannot fathom that any bank could seize her funds for my debt if I am not on the account, but from what I see WFB isn’t above some shenanigans that can cause more than a little heartburn.

[Flamingo]

It appears you already have an attorney lined up so I would discuss the entire situation with him - the reason being is that your adult daughter is being claimed as your dependent and her assets, income, etc. are part of your household income. With your name on any of her accounts that gives you access to those funds and they would be considered an asset. Taking your name off of the account(s) several months before filing could pose an issue so I would suggest going over this entire matter with your attorney.

[SilverQT]

Thank you, that is definitely something I had not thought of. Interestingly, he did instruct me to do this to protect against WFB taking her savings (about $4k) for my cc debt. You are bringing up a good question I will ask, though, regarding her funds being considered an asset of mine in the joint account. There will be one more loan disbursement to her and one to me in late March. Since they are loans for college I didn't think they would be considered income. I would hope that the funds in her checking account which is non-joint would not be considered an asset of mine, though since she does move it back and forth a bit with the savings perhaps it would be considered comingled. Perhaps moving the savings to another joint account at another bank might be acceptable - when he instructed me to have the account at WFB closed that may have been what he meant and I didn't realize it. Wherever it is held, it is not a large amount and I would think/hope it would be protected under the exemptions California allows - my home is quite underwater and I have no savings myself. I do not want to have her funds be in danger of WFB taking them as that would compound the situation and impact her terribly. I am struggling to stay afloat as long as possible while I learn as much as I can to proceed properly!

[tcreegan]

Hi SilverQT,

Daughter in college? As long as she is full time, you can claim her as a dependent until 24 yrs. (more for IRS purposes than BK)

Is there a reason to bank at WF? Maybe she can move both accounts to a bank on campus...?

The loan proceeds shouldn't be income, but you have the right idea about comingling, keep it separate.

California system 2 BK exemptions have a nice wildcard if you don't need the homestead exemption.

To me it sounds like your attorney was worried about WFB clamping down on your other accts when you BK the cc acct. I don't think he was worried about the BK, just protection from WFB.

Hope your daughter does well in college, my advice to college-bound kids was always "Go to class...no matter what!"

Good luck w/ your BK situation,

Tom in Colo

[BobMango]

My wife was cosigner on all of our kids accounts. They had a total of about $6K in them when we filed. Our attorney was not overly concerned about either the trustee or the bank going after it, but we used our exemptions to protect it anyway. That left an asset exposed that we were sure the trustee would abandon ($10K of cattle) so it worked out.

At any rate, I'd advise your daughter to move from WF to almost any other bank. WF is the worst and will freeze any account they can when they get notice of the filing. Many on here have learned that to their detriment.

Our accounts were all with a local CU and my wife remains on my kids accounts still.

[SilverQT]

Thank you! You bring up an interesting point on the dependant issue for which I will generate a separate post.

Some years ago daughter opened a WFB checking on which her father signs and a WFB savings on which I sign, primarily for convenience. They are under her SSN, and the end-of-year interest information for tax purposes goes to her only (it’s negligible). WFB is very convenient for her, hence wanting to just open a new savings account in her name only at WFB again. The funds between savings and checking have been comingled, however. That said perhaps WFB might tag the checking if she were to move the savings into it or another separate savings account. From what I gather they can be a total nightmare. The funds to which I have had access will easily be covered by the CA exemptions. I’ve seen some posts where it seems sometimes transfers of assets are ok if declared and explained and thus no issues have arisen. The funds won’t disappear; they will just be removed from potential seizure by WFB. You are correct – that was the attorney’s concern. I will talk with her about moving to another bank entirely. She is uncommonly frugal and very protective of her money (she saves every penny she can – I have no fear of that girl ever getting into my situation, whew). Just a suggestion of WFB touching her funds sends her into a righteous tizzy!

I am absolutely amazed reading that paying for college costs can be considered a luxury in a BK situation! Student loans are not dischargeable so the creditor is paid. As my contribution is not for tuition or anything out of the normal as far as living costs go I do hope that will be ok. The attorney seemed to think so and he is quite experienced and highly recommended. And I am delighted to share that my daughter is very future focused, gets good grades (hence the heaven sent tuition grants), and is very appreciative of being able to attend college. A bright light for me in what has been a very trying few years that have brought me to needing this most excellent forum!