Car loan default and loan delinquency are two separate things entirely. It's easier to get out of a delinquency. Both will report on your credit, but one is worse than the other. Here we will explore the difference between the two.

What Is a Delinquency? When you first set up your car loan, you agreed to certain terms and conditions with the lenders. One of these terms was the date on which your payment would be received by you every month. If you fail to make the payment to the lender by the specified date then your car loan will become delinquent. Lenders will charge a fee to your account for a payment being late, and you will risk your interest rate increasing.

What Is a Default? When you have not paid your payments, or have not paid them in full for a certain period, then the loan is considered defaulted. The car lender will have different conditions for a default depending on the bank. Most often though a car is considered to be in default status after being unpaid or underpaid for 90-120 days. When a car loan has defaulted, the lender reserves the right to take possession of the car and try to recoup the money they lost by selling it. You will still be held responsible for any amount of the overall loan that couldn't be recouped by the sale of the vehicle.

What Can I Do if I'm Late? If you are late in making a payment, or can see that you will be late, you need to contact the lender and let them know. Some lenders can defer the payment for you (push the payment back out to the end of the loan, making your payoff one month later), or work with you another way. You still want to try your best to make the payment. Be prepared for a late fee that will be added to your account, usually on your next month's payment. Your interest rate will likely go up as well. As long as you make on-time payments for several months thereafter, you may be eligible to have this rate decreased back to the standard rate.

What If I Know I'm Going to Default? An involuntary repossession will look worse than a voluntary one. If your circumstances have changed and you know you won't be able to make the payments anymore, your first step would be to try to refinance the current loan. You may be able to save enough on the monthly payments to be able to afford to keep the car. If that doesn't work out, then you should try to sell the car for the payoff amount. As a last resort you will want to contact the finance company and explain the situation to them. They will ask that you return the car to them. This will end up showing on your credit report, and will make it harder to find financing later on, but it still looks better on your report than if the lender repossesses the car.

Knowing the difference between a car loan default and delinquency is important.  Being aware of the potential consequences concerning each one is essential when making payments.

Partition:  Any one or more joint tenants, or co-tenants, may file an action against all joint tenants for the partition of real property owned jointly. A partition action may also be commenced to partition personalty. If the property can not be equitably partitioned, the court can order the property sold, and the proceeds partitioned among the joint or co-tenants.    However, a partition action can not be maintained for property owned by a legal entity, such as a partnership.   From an asset protection planning perspective, the right to partition should be a factor whenever a joint tenancy or a tenancy in common form of ownership is considered.

Tenancy in Common:  Tenancy in common is a form of ownership of property, either real or personal, that is characterized by one or more co-tenants, each owning an undivided interest in the property. The primary feature of a tenancy in common is the lack of a right of survivorship.  Where two or more people own undivided interests in property, they are presumed to be tenants in common, unless a contrary intent is expressed in the document through which they took title.    Property held with a spouse as tenants in common does not provide the creditor protection afforded by entireties property.  Generally, creditors can reach such property at least to the extent of the one-half, or other, interest owned by the debtor. 

Joint Tenancy:  In a joint tenancy, each co-owner is considered to be the owner of an undivided portion as well as the owner of the entire interest. Upon the death of a co-owner, the surviving joint tenant(s) continue as owner(s) of a larger undivided interest as well as the entire interest. During the life of a co joint tenant, his creditors may reach the co-tenant’s share of the property. However, upon the death of the debtor survived by other joint tenants, his creditors may not reach his interest, it having been vested in the surviving joint tenants.  There currently are no cases that prohibit a debtor creating a joint tenancy shortly before his death to avoid having the property pass through his estate, thereby making such property unavailable to those creditors who file a claim against the debtor’s estate. However, consideration should be given in such a situation to a potential action pursuant to Florida Statues, Chapter 726 regarding a fraudulent transfer.

Tenancy by the Entirety:  Tenancy by the entireties dates to the English common law and a time when married women could not own property individually. Tenancy by the entireties is a form of property ownership whereby a husband and wife could hold property as an indivisible unit. An ownership interest in tenancy by the entireties property was considered “non-severable” without the joint consent of the spouses. In contrast, in a joint tenancy with the right of survivorship, each joint tenant is presumed to have an equal share that is severable by the demand of either joint tenant, regardless of whether the joint tenants are spouses. Florida is one of approximately a dozen states that recognize tenancy by the entireties (hereinafter “TBE”) as a form of ownership between husband and wife.  Keep in mind that  Tenancy by the entireties may exist in either real property or personal property.   Tenancy by the entireties does not have the technical status of being “exempt property.” Rather, it is considered to be “immune” from levy or seizure of a creditor owned by only one of the spouses. The property is not divisible on behalf of one spouse alone, and therefore cannot be reached to satisfy the obligations of only one spouse. However, creditors of both the husband and the wife, jointly, can attach the property so owned.  

6 unities  must exist for ownership to be held as tenants by the entireties.  They are as follows:

1. Unity of Possession – both spouses have joint ownership and control. With respect to a bank account, it may be acceptable that a deposit agreement allows either spouse to withdraw independently of the other on the theory that the power to withdraw is an expression of an authority of agency given by each spouse to the other.
2. Unity of Interest – each spouse has the same interest in the account – it is not a problem if one spouse deposits all or most of the funds into the account as long as each spouse has the same interest immediately after the deposit.
3. Unity of Time – the interests of both spouses in the account must originate simultaneously in the same instrument, such as on the signature card. Spouses should not try to convert an individual ownership into a tenants by the entireties by “adding” the second spouse to the account or property. Instead, the asset should be transferred into a new account or titling arrangement that allows for the interest of both spouses to be created at the same time and in the same instrument.
4. Unity of Title – spouses must have ownership under the same title.
5. Survivorship – on the death of the first spouse to die, the surviving spouse becomes the sole owner of the entireties’ property. A general power of appointment over jointly owned assets, given to one spouse by the other spouse, will vitiate tenancy by the entirety status.
6. Unity of Marriage – the parties must be married at the time the property is titled in their joint name. Only spouses enjoy the protection of tenants by the entirety ownership. If there is any ownership interest in the property by a third party, there is no tenancy by the entirety.

Although tenants by the entirety requires that the couple be married, a married couple can also own property as joint tenants, with right of survivorship. When property is held as tenants by the entirety, only the creditors of both the husband and wife, jointly, may attach the tenants by the entirety property; the property is not divisible on behalf of one spouse alone, and therefore it cannot be reached to satisfy the obligation of only one spouse. If property is held as a joint tenancy with right of survivorship, a creditor of one of the joint tenants may attach the joint tenant’s portion of the property to recover that joint tenant’s individual debt.

Prior to the Florida Supreme Court’s decision in Beal Bank v. Almand and Associates, 780 So.2d 45, 53 (Fla. 2001), when a married couple took title to real property, it was presumed under the law that title was as tenants by the entireties. For personal property, the presumption was not present. Beal Bank modified the law regarding the presumption of title with respect to married couples acquiring title to personal property. In Beal Bank, the Court said: “we conclude that stronger policy considerations favor allowing the presumption in favor of a tenancy by the entireties when a married couple jointly owns personal property.” Id., at page 57. The Supreme Court went on to say: “[a]ccordingly, we hold that as between the debtor and a third-party creditor (other than the financial institution into which the deposits have been made), if the signature card of the account does not expressly disclaim the tenancy by the entireties form of ownership, a presumption arises that a bank account titled in the names of both spouses is held as a tenancy by the entireties as long as the account is established by husband and wife in accordance with the unities of possession, interest, title, and time and with right of survivorship. The presumption we adopt is a presumption affecting the burden of proof pursuant to section 90.304, Florida Statutes (2000), thus shifting the burden to the creditor to prove by a preponderance of evidence that a tenancy by the entireties was not created. [Footnotes omitted.] Id. at page 58.

The effect of Beal Bank is to allow married couples greater protection from the creditors of one of the spouses where they have personal property owned by them jointly. With respect to bank accounts at least, the presumption is that an account owned by husband and wife is owned as tenants by the entireties, unless is specifically states that they do not own the account as tenants by the entireties. With respect to other forms of personal property, it is important that the titling documents for the property specifically state that the property is owned as tenants by the entireties, or that at least it does not specify some other form of ownership, such as joint tenants with right of survivorship.

Notwithstanding the Beal Bank case, married couples should be extremely careful in simultaneously establishing tenancy by the entireties accounts, and labeling them as such. Where a financial institution does not provide a “check the box” alternative for tenants by the entirety, prudence dictates that the parties write on the account agreement “TBE” or “TBE” when opening an account. If in doubt about the status of an account, document intent and the joint origin of the ownership to the extent necessary to clearly establish the parties intended and expected that tenants by the entireties was established.

If a married couple owns real estate outside of the State of Florida, it must be determined whether the state in which the property is located recognizes tenancy by the entireties as a form of ownership. Most states, including Colorado and North Carolina, do not recognize tenancy by the entireties. If the state where the real property is located does not recognize tenancy by the entireties, then the ownership should be converted to an intangible so that Florida law will apply. This can be done by transferring the property to a land trust, a partnership, a corporation, or a limited liability company, the interests in which will be held as tenants by the entireties between the spouses.

Pay Garnishments Rise as Debtors Fall Behind
by John Collins Rudolf
Thursday, April 1, 2010

PHOENIX -- When the bank sued Leann Weaver for not paying her credit card balance, her reaction was typical for someone in that situation. Personal and financial setbacks weighed her down, and she knew she owed the $2,470. So she never went to court to defend herself.

She was startled by what happened next. When she swiped her debit card at the grocery store, it was declined. It turned out Capital One Bank had taken $224.25 from her paycheck, a quarter of her wages for two weeks of work at a retail chain, and her bank account was overdrawn.

"They're kicking somebody who's already in the dirt," she said.

One of the worst economic downturns of modern history has produced a big increase in the number of delinquent borrowers, and creditors are suing them by the millions. Concern is mounting in government and among consumer advocates that the debtors are not always getting a fair shake in these cases.

Most consumers never offer a defense, and creditors win their lawsuits without having to offer proof of the debts, much less justify to a judge the huge interest charges and penalties they often tack on.

After winning, creditors can secure a court order to seize part of the debtor's paycheck or the funds in a bank account, a procedure called garnishment. No national statistics are kept, but the pay seizures are rising fast in some areas -- up 121 percent in the Phoenix area since 2005, and 55 percent in the Atlanta area since 2004. In Cleveland, garnishments jumped 30 percent between 2008 and 2009 alone.

Debt collectors say they are being forced into the action by combative debtors who dodge attempts to settle. "I think there's a lack of accountability among debtors, and a lack of interest in reaching out to their creditors to resolve things amicably," said Fred N. Blitt, president of the National Association of Retail Collection Attorneys.

Bankruptcy can clear away most debts. Yet sweeping changes to federal law in 2005 -- pushed by the banking lobby -- complicated that process and more than doubled the average cost of filing, to more than $2,000. Many low-income debtors must save for months before they can afford to go broke.

In some states, courts allow creditors to charge high interest rates for years after a lawsuit is decided in their favor. In others, creditors can win lawsuits by default and seize wages and bank accounts without a case ever appearing before a judge.

Lack of participation is the most fundamental problem. Some consumers do not even know they are being sued; the people who are supposed to serve them with formal notice have sometimes been caught skipping that step and doctoring the paperwork.

In far more cases, consumers are served but still do not offer a defense. Few can afford lawyers; others are intimidated or confused. In their absence, judges can offer little relief.

In the rare event that a consumer battles back, creditors frequently lack the documentation to prove their claim, and cases are dropped. That is because many past-due debts are owned not by the banks that issued them, but by debt collectors who bought, for cents on the dollar, a list of names and amounts due.

"If the consumers were armed with more education about how to defend against these debts, they'd be successful," said Jeffrey Lipman, a civil magistrate in Des Moines.

The case of Sidney Jones shows how punishing the system can be. In January 2001, Mr. Jones, 45, a maintenance worker from California Crossroads, Va., took out a $4,097 personal loan from Beneficial Virginia, a subprime lender now owned by HSBC, the big bank.

He fell behind, and Beneficial sued. Mr. Jones did not appear in court. "I just thought they were going to take what I owed," he said.

By default, Beneficial won a judgment of $4,750, plus $900 in lawyers' fees, with the debt accruing interest at 27.55 percent until paid in full. The bank started garnishing his wages in March 2003.

Over the next six years, the bank deducted more than $10,000 from Mr. Jones's paychecks, but he made little headway on his debt. According to a court order secured by Beneficial's lawyers last spring, he still owed the company $3,965, a sum nearly equal to the original loan amount.

Mr. Jones, who did not graduate from high school, was baffled. "Where did all this money go that I paid them?" he said.

Dale Pittman, a consumer law lawyer in Petersburg, Va. , took Mr. Jones's case without charge, and found that all but $134 of his payments had gone toward interest, fees and court costs. "It's a perfectly legal result under Virginia law," Mr. Pittman said.

HSBC said it ceased collection shortly after Mr. Pittman took the case, but declined further comment. "We are confident we are treating our customers fairly and with integrity," Kate Durham, a spokeswoman for HSBC North America, said in an e-mail message.

The rare debtors who press their claims, and catch a sympathetic judge, have a shot at a result more to their liking.

Ruth M. Owens, a disabled Cleveland woman, was sued by Discover Bank in 2004 for an unpaid credit card. Ms. Owens offered a defense, sending a handwritten note to the court.

"After paying my monthly utilities, there is no money left except a little food money and sometimes it isn't enough," she wrote.

Robert Triozzi, a judge at the time, heard the case. He found that over a period of several years, Ms. Owens had paid nearly $3,500 on an original balance of $1,900. But Discover was suing her for $5,564, mostly for late fees, compound interest, penalties and other charges. He called Discover's actions "unconscionable" and threw the case out.

Discover defended its actions. "This account was placed with an attorney only after all other efforts to reach the card member were exhausted," Matthew Towson, a bank spokesman, said in an e-mail message.

Going to court is no guarantee of victory, of course. Consumers who do go are sometimes intercepted by collection lawyers, who press them to sign papers settling without a trial. These settlements may be against the interests of debtors, but they sign anyway.

"We're signing off on a lot of settlement agreements where we shake our heads and ask, 'Why is this person settling to this?' " Judge Lipman said.

For the working poor, losing a lawsuit can mean disaster. A 1968 federal law exempts 75 percent of a worker's wages, or 30 times the minimum wage per week, from being taken in garnishment -- whichever is less. But increases in the minimum wage have failed to keep up with inflation. As federal law stands now, just $217.50 a week is exempt from seizure. (A few states set higher cutoffs.)

The working poor "have difficulties maintaining payments on life's necessities with their full paycheck," said Angela Riccetti, a lawyer with Atlanta Legal Aid who represents indigent clients whose wages are being garnished. "You lose 25 percent of it and everything folds."

For Leann Weaver, the woman at the grocery store, Capital One's lawsuit made a bad situation worse. After being evicted from her apartment, she moved in with her grandparents. Without them, she might have ended up on the street or in a shelter, she said.

Capital One declined to comment on Ms. Weaver's case. "We encourage anyone facing difficulties meeting their financial obligations to contact us right away," Tatiana Stead, a bank spokeswoman, said in an e-mail message.

Ms. Weaver said she repeatedly asked Capital One for more time to pay her $2,470 debt, but last year the bank filed suit. She failed to show up in court, and a judgment was entered against her, swollen by $1,800 in interest and lawyers' fees. Then the garnishment began, almost $500 a month, or a quarter of her pay.

"I can't even look at my paychecks any more," she said.