Does Bankruptcy Affect A Joint Bank Account?

Joint Bank Accounts & Bankruptcy: What You Need To Know

Banks will usually freeze your account after bankruptcy, be it a joint account or not, so our first piece of advice is this: Open a second bank account before filing for bankruptcy.

You will then be able to transfer your wages and other deposits in your new account, without the risk of your bill payments or other expenses becoming affected should your existing account become frozen.

A second bank account will also protect your finances from any creditors who haven’t yet been able to stop withdrawals from your account after you have filed for bankruptcy.

When choosing a new bank, don’t open an account with any financial institution that you currently owe debts to.

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Choose an institution that you have no previous relationship with, and explain your situation to them.

Under Canadian law, you won’t be prevented from opening a new account, unless they suspect you of criminal activity.

If you own a joint account, you might want to open a new joint account elsewhere or open a separate account to the person you previously partnered with.

How an existing  joint bank account is affected during bankruptcy

There are two important things to take into consideration here.


With a joint bank account, both parties are legally responsible for paying back the money owed on an overdraft.

If you’re declaring bankruptcy, you will be cleared of your responsibility for paying back the money owed, but the other person won’t be.

They will still have to pay back the full balance owed on the overdraft, so this is something you need to remember before filing for bankruptcy.

Especially if you are living together, your household could be put in financial jeopardy if there was a lot of money owed on the overdraft, so to remedy the situation, you might want to ask the bank to remove the other party from the account before bankruptcy proceedings begin.

This way, neither of you would be responsible for paying the balance, and the overdraft would be eliminated.

There is no guarantee that your bank will agree to this, of course, especially if they suspect the debt might not get paid, but it is still worth trying.

The cash balance

If there is a large amount of money in the joint account, some of it will be seen as an asset by your trustee.

Consequently, you might lose some of that money, as being an asset, the trustee will use it to pay off as much of your existing debt as possible.

Of course, you won’t be put in financial jeopardy this way.

The trustee will still make sure you have a reasonable amount of cash available to cover your normal living expenses, but the excess will usually be taken to clear your debts.

This is understandable, but it’s important to remember that any money taken could adversely affect the joint account holder who is not considering filing for bankruptcy.

Not only will they lose the money that they had made themselves, but their credit rating will be affected too.

This is another reason why you might want to try to remove the other party from the account before bankruptcy proceedings begin.

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Before filing for bankruptcy, it is important to have some understanding as to how your finances will be affected after proceedings have begun.

Not only will you need to know how you will be impacted by bankruptcy, but if you do have a joint account with somebody else, you need to know how they might be affected as well.

Here at Bankruptcy Canada, our licensed trustees are here to answer any of your questions related to bankruptcy and to discuss any other types of debt relief solutions that might be open to you.

At an initial consultation with us, we will help you evaluate your finances, and will explain the pros and cons of filing for bankruptcy.

If there are other options open to you, we will talk in more detail about the pros and cons of them too.

Schedule your free consultation with us here or call (877) 879-4770 to arrange a meeting with us.

We are here to set you on the path towards financial freedom and a life free of debt, so don’t delay getting in touch with us.

With years of experience, you can trust our licensed insolvency trustees to support you in your particular situation.

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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