By: Robert J. Nahoum
In New York, the quickest way for a debt collector to collect on a judgment is with a frozen or “restrained” bank account. Often, a consumer doesn’t even know he or she has been sued in a debt collection lawsuit until a check bounces or the ATM doesn’t spit out any money. The problem is made much worse when there is another person on the account who doesn’t owe the debt. Sometimes, it is a non-debtor spouse, a non-debtor parent son or daughter; whatever the case may be, when the debt collector freezes the wrong money something has to be done.
Under New York Banking Law, the creation of a joint bank in the names of two people creates a presumption that the person depositing the money intends that the other person has full rights to make withdrawals from the account. This legal presumption is created regardless of the source of the deposits, and each person is entitled to an undivided one-half interest in the account, giving either of them the right and power, during the lifetime of the other, to withdraw up to the full amount of their money.
So, because the law presumes that half the money in the account belongs to the judgment debtor and the other half belongs to the other person, the debt collector can take at least half unless it can be shown that the joint account was created for convenience only.
The statutory presumption that half the money in the joint account belongs to the judgment debtor is a rebuttable presumption that can be overcome by clear and convincing proof that the joint account was used for convenience. Either the judgment debtor or the non-party account holder can go to court, show that the joint account was created only for convenience sake and rebut the presumption. To do this, the challenger can demonstrate that the non-debtor is the only one who used the account, that the other person did not have an ATM card, a debit card or that he or she did not have withdrawal privileges or any other evidence that tends to show that the account actually belongs to the non-party.
WHAT TO DO:
If your bank account has been frozen because of a judgment against a joint account holder, act quickly before the situation gets worse. Firstly call the attorneys for the debt collector and explain that they froze the wrong person’s money. Be careful, as soon as they get you on the phone, regardless of whose money it is, they will try and convince you to apply it towards the judgment. Don’t fall for it! Show them whatever proof you have that the account was for convenience only. It might help to show deposit slips that trace all the deposits back to the non-debtor. If the attorneys won’t cooperate, you will need to make a motion to the court. This is a technical process and should be done carefully. If you can, consider hiring an experienced consumer attorney familiar with debt collection defense.
If you need help settling or defending a debt collection lawsuit, stopping harassing debt collectors or suing a debt collector, contact us today to see what we can do for you.