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Closing Sole Prop and Now Have Funds for Debt

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If a bank closes a sole proprietor account and now the customer's personal joint account has funds, can the bank offset to satisfy this charged off debt?

Your reference is to the concept and practice of setting off funds owed to a debtor against those owed by a debtor. If there is a common owner of a charged-off overdrawn account (the funds owed by the debtor) and a joint deposit account in the same bank (funds owed by the bank to the debtor), setting off all or part of the charged-off amount against the deposit account balance is permitted under the laws of all states of which I am aware.

You should check your own state's laws, and make sure you check to see if your state is a "single action" state, which would allow you to take only one action to collect the charged-off amount. And, of course, you must make certain that you still have the right to collect the charged-off balance under any applicable statute of limitations.

First published on 01/19/2015

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