When managing finances, it's important to understand how various rules and agreements work, especially when it comes to joint accounts. A joint account can be a great way for two or more people to manage shared expenses, but it also comes with specific risks—especially when one account holder has outstanding debts. One of the most significant risks to be aware of is the right of offset.

In this blog, we'll break down what the right of offset is, how it can impact your finances, and what you can do if you find yourself in this situation. It’s important to understand that this rule can affect both your credit and your ability to access funds in a joint account, even if you’re not the one with the debt.

What Is the Right of Offset?

The right of offset is a legal provision that allows a financial institution to seize funds from a joint account to settle any outstanding debts owed by one of the account holders. In simpler terms, if one person in a joint account owes money to the bank (for example, due to credit card debt, unpaid loans, etc.), the bank can automatically take funds from the joint account without prior notice. This can happen regardless of who deposited the money or how much of the account balance belongs to the other account holders.

For example, if you and a family member or spouse share an account, and they have an outstanding debt with the bank (such as unpaid credit card debt), the bank can take money from the joint account to cover their debt, even if the other account holder has not been involved in the debt.

How Does This Affect You?

• Unexpected Deductions: If you have a joint account and one of the account holders owes money to the bank, the financial institution can withdraw funds from the account without warning. This means that even if you are not responsible for the debt, you could lose access to the money you’ve deposited.
• Impact on Credit and Financial Health: The right of offset can severely impact your financial situation, especially if the debt holder has significant unpaid debts. It may not only reduce the amount of available funds in your account but also create a disruption in your financial plans, making it difficult to pay bills or meet your financial commitments.
• Legal Rights of the Bank: It’s important to understand that the right of offset applies regardless of the relationship between the account holders. If one account holder is in debt, the bank can legally seize the funds, even if the other account holder has no involvement in the debt or is financially responsible.

How Can You Protect Yourself from the Right of Offset?

• Keep Separate Accounts: If possible, consider separating your finances and maintaining individual accounts to avoid potential complications. If you are not comfortable with the risk of one person’s debt affecting the other, keeping separate accounts ensures that both parties are protected from the right of offset.
• Talk to Your Bank: If you do share a joint account with someone who has significant debt, it’s important to talk to your bank. Ask about the institution’s policies regarding the right of offset and what steps can be taken to minimize risks. Some financial institutions might be open to setting up separate accounts for the individuals involved.
• Monitor Your Joint Account Regularly: Keep track of the transactions made within your joint account to ensure no unauthorized withdrawals are being made. This can help you stay on top of any unexpected changes and protect your finances.
• Consider Seeking Professional Advice: If you are facing challenges with joint accounts and debts, or if the right of offset is affecting your financial situation, consider consulting a Licensed Insolvency Trustee. A Licensed Insolvency Trustee (LIT) can provide advice on how to manage debt and address issues like the right of offset, especially if you are facing a situation that might involve bankruptcy or a Consumer Proposal.

How Morataya Corp Can Help You

At Morataya Corp, we understand how financial challenges can arise unexpectedly. If you’re dealing with debt or facing the consequences of the right of offset in a joint account, we can guide you through the process of managing your debt and finding a solution that works for you.

Our Licensed Insolvency Trustees (LITs) are the only government-approved professionals who can provide the expertise needed to help you navigate debt relief options, such as Consumer Proposals and Bankruptcy Protection.

By working with Morataya Corp, you’ll have the support of a team that understands the complexities of joint accounts, the right of offset, and how to protect your assets from unnecessary deductions.

Contact Us Today for a Free Consultation

If you're facing the risk of having your funds taken due to the right of offset or struggling with debt, Morataya Corp is here to help. Our team of Licensed Insolvency Trustees can assess your situation, provide tailored advice, and help you create a plan to regain control of your finances.

Contact us today for a free consultation and learn how we can help you avoid the risks of joint accounts and work towards a debt-free future. Don’t let debt take control—reach out now!

Call us at 416-784-0904 (Ontario) or Toll-Free at 1(888) 880-0904 (Alberta) or visit www.morataya.ca to get started.