Judgment obtained before marriage, are half the bank account assets protected?

[AZGuy23]

I have a bank levy placed on a bank account and the account is a joint account with my wife. I am in Arizona, which is a community property, so all debt acquired after marriage, is the debt of both people.

What about debt and a judgment that took place before getting married? Can a creditor go after joint bank accounts, or are half the funds exempt from garnishment?

[Pjmax]

Just curious, AZGuy23, I've been following your posts: is this related to your other posts about a creditor grabbing $8300 from your bank accounts, or is this a new event?

[AZGuy23]

Yes, it is related to that bank levy. It's still in the process of being sorted out. On the Answer from Garnishee (from the bank to the judgment creditor), the bank said that my wife is also on that account (didn't say it was my wife, but listed her name). Just today, I received a couple court forms filed by the judgment creditor that they are wanting to know the interest of this 3rd person in the bank accounts. I have to now request a hearing (or actually my wife does I think), to explain what her interest in the accounts is. If she does not answer within 20 days, then they assume that I have 100% interest in the accounts and are requesting the held funds to be released to them.

This is a bigger pain in the ass than I could have ever imagined...and it's just getting more and more expensive now that I've hired an attorney to help me sort it out.
I would of just taken care of this years ago had I known the judgment was out there.

[Pjmax]

So, did you decide against filing BK? It sure sounds like you could run up some large legal bills fighting this thing.

[Pjmax]

http://www.lawofarizona.com/articles...rty-wills.html

This might give you some insight (until an expert comes along) to your community property/debt questions. Skip down to the links to the AZ Legislature docs.

[GoingDown]

Did you know about the judgment before the bank levy?

If yes, why did you keep so much money in your bank after that?

That was a huge hit to your assets. If you had at least withdrawn most of it and kept it as cash in your home before they seized your bank account, you wouldn't be facing such a horrible situation right now.

The message I want to get out there to anyone reading this is that after someone files a lawsuit against you, your money is sadly safer as cash stuffed under your mattress than it is in a bank. The only exceptions to that are when the money is direct deposited from truly exempt sources (Social Security, etc.) and not mixed with other funds. See the Exempt Funds "stickie" in this forum above for more details.

[despritfreya]

ARS 25-215 (pay particular attention to “B” below):

A. The separate property of a spouse shall not be liable for the separate debts or obligations of the other spouse, absent agreement of the property owner to the contrary.

B. The community property is liable for the premarital separate debts or other liabilities of a spouse, incurred after September 1, 1973 but only to the extent of the value of that spouse's contribution to the community property which would have been such spouse's separate property if single. (To me this means 1/2 of spouse’s income since 1/2 would have been deemed his/her contribution to the community.)

C. The community property is liable for a spouse's debts incurred outside of this state during the marriage which would have been community debts if incurred in this state.

D. Except as prohibited in section 25-214, either spouse may contract debts and otherwise act for the benefit of the community. In an action on such a debt or obligation the spouses shall be sued jointly and the debt or obligation shall be satisfied: first, from the community property, and second, from the separate property of the spouse contracting the debt or obligation.

__________

Des.

[AZGuy23]

Did you know about the judgment before the bank levy?

If yes, why did you keep so much money in your bank after that?

I guess the answer to that is yes and no. I knew of the judgment back when it was put in place in 2008, and at that time, I ignored it. A few years passed and nothing happened, about a year or so ago when I got a court form that said "Release of garnishment" or something to that effect. I had practically forgotten about the judgment by that point but I did a search for my name on the recorder's office as well as the county court and nothing came up, so I naively convinced myself that the "release of garnisment" form and not finding the judgment meant the judgment somehow expired or fell off. Then next thing I knew, two bank account levied. Luciky the third bank account is in the business' name (which is a corporation with an EIN) so those funds were safe.

Had I done it different had I really known the judgment was out there? I'd like to think yes but who knows...I've ever actually heard of anyone's bank account being levied (personally known). I'm making arragements now to take care of it and I guess it has to be taken care of one way or another, can't just keep trying to dodge it.

[AZGuy23]

BTW, the attorney said this in relation to my wife's share of the assets...

"Although the judgment is only against you and arose from a premarital debt, they can levy against your separate and your community property, which includes your wife's accounts unless they only hold her funds that she had prior to marriage. In short, the creditor may levy against any and all community income irrespective of who earned the income or in whose account it is held. This means 100% of funds held by you or her unless traceable to premarital sources."

[GoingDown]

BTW, the attorney said this in relation to my wife's share of the assets...

"Although the judgment is only against you and arose from a premarital debt, they can levy against your separate and your community property, which includes your wife's accounts unless they only hold her funds that she had prior to marriage. In short, the creditor may levy against any and all community income irrespective of who earned the income or in whose account it is held. This means 100% of funds held by you or her unless traceable to premarital sources."

Yep, that's what I thought about it, too.

I hope you BOTH keep as little money as possible in ANY checking or savings accounts until this matter is fully resolved.

This is way out in left field, I know, but besides the obvious religious reasons for marriage, I see HUGE disadvantages for people who do get married.

For example, if one spouse gets into a terrible car accident and it is their fault, and they didn't have the appropriate amount of insurance before the accident, in a community property state, they are both going to end up going broke over it.

Similarly, if one gets sick with some horrible illness, loses his or her job, but the other spouse still has a good income and assets, getting on Medicaid is nearly impossible, so the medical bills bankrupt both of them. There are just so many downsides to getting married, especially in a community property state, but almost no one looks at it from this angle when they go into the marriage, and fortunately, most people never have to deal with these issues, so it never comes up.

[GoingDown]

I guess the answer to that is yes and no. I knew of the judgment back when it was put in place in 2008, and at that time, I ignored it.

I'm afraid this is what most people do, and this is what makes it so easy for debt collectors to do their job and get paid. If more people knew about the consequences of ignoring a lawsuit until it was too late, and were more proactive about judgment-proofing themselves by emptying checking and savings accounts as soon as someone files a lawsuit against you, or even threatens to file one, it would make the debt collector's job so much more difficult and make filing lawsuits against debtors far less attractive to them, since the odds of getting much money from a debtor would be miniscule.


A few years passed and nothing happened, about a year or so ago when I got a court form that said "Release of garnishment" or something to that effect. I had practically forgotten about the judgment by that point but I did a search for my name on the recorder's office as well as the county court and nothing came up, so I naively convinced myself that the "release of garnisment" form and not finding the judgment meant the judgment somehow expired or fell off. Then next thing I knew, two bank account levied. Luciky the third bank account is in the business' name (which is a corporation with an EIN) so those funds were safe.

Had I done it different had I really known the judgment was out there? I'd like to think yes but who knows...I've ever actually heard of anyone's bank account being levied (personally known).

Yep, this is what I hear a lot of times. People have no idea about it until it suddenly comes out of nowhere and happens to them. My experience with it goes back to when I was a kid growing up in Eugene, Oregon, and my mom and dad owned a 4-plex. One of their renters filed a lawsuit against them for not returning their deposit, and my parents lost the lawsuit. The very next day they discovered their checking account had been drained by the wily renters to satisfy the judgment plus the fees charged by the bank. All their checks started bouncing and their debit cards were being declined. We ended up getting our power turned off at our house, and I still remember the image of everything going dark and all the appliances and so fort stopped working for about a week until my parents scraped up some cash and went down to the utility payment center and paid the past due bill in cash since they would no longer accept checks from them. But most people never experience this and have no clue what is about to happen to them once someone files a lawsuit against them. I just wish I could get the word out there so people knew to brace for impact once someone files a lawsuit against them.

I'm making arragements now to take care of it and I guess it has to be taken care of one way or another, can't just keep trying to dodge it.

At this point, that's probably all you can do. They hold all the cards now.

I am adding this thread to the EXEMPT FUNDS stickie above because I think it has some important information in it and I don't want it to get buried over time as this thread gets older.

[bcohen]

BTW, the attorney said this in relation to my wife's share of the assets...

"Although the judgment is only against you and arose from a premarital debt, they can levy against your separate and your community property, which includes your wife's accounts unless they only hold her funds that she had prior to marriage. In short, the creditor may levy against any and all community income irrespective of who earned the income or in whose account it is held. This means 100% of funds held by you or her unless traceable to premarital sources."

I'm not sure this interpretation of ARS 25-215 is correct. In fact, ARS 25-215 (B) would suggest otherwise: "The community property is liable for the premarital separate debts or other liabilities of a spouse, incurred after September 1, 1973 but only to the extent of the value of that spouse's contribution to the community property which would have been such spouse's separate property if single." This would suggest that your wife's wages or separate bank accounts cannot be garnished for a judgment for a debt in your name alone prior to the marriage taking place. That is the interpretation of the attorney who is assisting me with my current legal battle with Discover Card/Gurstel Chargo.

In any case, for me this a moot point, because if for some reason I lose the lawsuit, I plan on filing for BK within 2 weeks or less.

[GoingDown]

This person spoke to a local Arizona attorney about this and that's what the attorney said.

To be on the safe side, I would make sure both spouses attempt to judgment-proof themselves as much as possible.

And this is not the first time I have heard of this happening, by the way. I know of someone in Arizona who was married to someone who had defaulted credit card debts before they got married, and then after they got a judgment, both people ended up having their checking accounts drained by the judgment creditor.

In theory, maybe it is not supposed to happen that way, but in reality, it does happen.

Banks just love to seize checking accounts whenever they get served by a judgment creditor and then ask questions later.

They are not on our side.

They do not protect your money.


Better safe than sorry later.

[AZGuy23]

Its hard for us to be completely judgment proof because we own our own business. Now I understand that since the business is a corporation, they can't take the funds out of a business bank account, but they can file with the court to take shares of the company from the owners and therefore now would have access to the business funds. Luckily there is only one judgment and all other accounts are past the SOL so as long as I take care of this one judgment everything should be fine going forward.

[GoingDown]

Its hard for us to be completely judgment proof because we own our own business.

It depends upon how you set up your own business. I am self-employed in both the construction field (mainly electrician stuff, but some plumbing, some carpentry, and some drywall repair, etc.) and in the law maintenance field. My business is not a corporation, not licensed, not bonded, and flies under the radar as far as creditors are concerned. I get paper checks from customers, go to the bank upon which it was drawn, stand in line and cash them. I have no inventory-- I let Home Depot, Lowes, and ACE Hardware store my inventory for me. My truck is below the exemption amount for vehicles in Arizona, and my tools of the trade are covered by a separate exemption. There is nothing for a debt collector to take from me.



Now I understand that since the business is a corporation, they can't take the funds out of a business bank account, but they can file with the court to take shares of the company from the owners and therefore now would have access to the business funds.

I hope you're not keeping a huge amount of money in that supposedly safe bank account, just in case. My rule of thumb with checking accounts after someone sues you is this... never keep more money in a bank than you can afford to lose.

I keep saying this, but nobody listens... after someone files a lawsuit against you, your money is safer in the form of cash stuffed under a mattress than it is inside any bank. Banks are not your friend, and they will not protect your money from a judgment creditor.

Luckily there is only one judgment and all other accounts are past the SOL so as long as I take care of this one judgment everything should be fine going forward.

I hope everything works out for you.