The Co-mingling Catastrophe
Why co-mingling is a catastrophe for people whose income ought to be fully protected.
Most attorneys give wrong advice about protection available to social security and other benefits!Most attorneys that are not specialists in debt collection or bankruptcy believe that retirement, social security, child support, alimony, workers compensation and other disability benefits are entirely protected from claims of creditors. Why would they say this and believe it in all sincerity if it isn't true? They say it because that is what the law technically says! Creditors can't go to the source of the funds (social security, workers compensation, the retirement management company, etc) to attach this income from the source.
But these attorneys are likely unaware that the legal protection provided to these sources of income is limited. There is a loophole that savvy creditors can and do use to take this money out of a bank account when the money going into the account is co-mingled.
Bad advice can be catastrophicSee, it is a legal myth that when money goes into a bank account from more than one source, it is mixed together so completely that no one can distinguish one dollar from another. So like making a loaf of bread, when the flour is mixed with water, yeast, and oil, no one can say the money in the account comes from any specific source. Sounds crazy doesn't it! If $100 comes from disability and $100 comes from wages, the protection under the law ought to allow a reasonable claim that half of the money is protected as disability and the other half isn't protected.
And this is where the sneaky loophole trips up most lawyers and consumers. Because the law doesn't allow people to allocate WHERE the money comes from when it is deposited into a bank account based on where the deposits came from. The law treats all the money in the bank account as funds mixed together (or co-mingled) as unprotected funds available for a creditor with a court order to take.
This is true even if EVERY SOURCE of money going into the account is from a protected source. Believe me, I know this sounds crazy. If your social security check and your pension check are both protected under both STATE and FEDERAL laws, why would it matter whether they are in the same account? I can only assure you that it does matter. While you are welcome to learn this lesson the hard way, it is in your best interest to simply take the advice of an attorney with many years of experience in the bankruptcy and debt collection field.
The solution is easy - you just won't want to implement it!The solution is easy - just open one account for each source of income. All the accounts can be at the same institution, but each needs its own account number. Your social security check goes into one account, and your spouse's social security check needs to go into another account. Your workers compensation, disability, child support, alimony, pension or retirement benefits all need to be in separate accounts! Do not cash a check at your bank or deposit money from any other source into any of these accounts. That means no birthday or holiday gifts, no bingo winnings, no expense reimbursements into any of these accounts or at the bank where these accounts are held. You may need to open up an account just to deposit small or occasional money you get from miscellaneous sources. It can seem like an overwhelmingly complicated way to live your life. But once you get used to this system, it can be completely stress free.
After all, the restrictions on the accounts are only concerned with the source of money going INTO the accounts. You may continue to spend the money in every account without restrictions.
Sure the law on co-mingling is nonsense. But no one needs to learn that a nonsense law can clean out their bank account. That would be having to learn about the law the hard way!