South Carolina Bankruptcy Exemptions and Law
Impact of COVID-19: Since the coronavirus pandemic began in the spring of 2020, South Carolina's bankruptcy courts have restricted or modified operations in various ways. These orders are available here. Briefly, facemask and social distancing requirements are in effect in all public areas, including parking lots. Clerks' offices are usually open, but could close with little or no notice. Clerks only accept dropbox filings and payments. Limited electronic filing is also available for some pro se filers (people who are trying to go through bankruptcy without a lawyer). Judges may hold hearings or meetings live, via telephone, or via videoconference.
The Benefits of Bankruptcy
Most people in South Carolina, and throughout the country, live from hand to mouth. Two-thirds of Americans have less than $1,000 in savings. A large number of these families have no savings at all. As a result, most households are unable to weather the financial storms which almost inevitably occur in life.
These storms come in various forms. They include job loss, serious illness or injury, economic downturn, and divorce or separation. These different storms have at least one thing in common. For the most part, debtors have little or no control over these situations.
A South Carolina bankruptcy attorney helps you regain control over your own financial situation. Bankruptcy is usually the only way to get off the revolving debt treadmill. This federal debt relief program also gives families the time they need to repay debt on their own terms. Generally, debtors get to keep most or all of their property during this process. Keep reading to learn more about bankruptcy laws and property exemptions.
A Monopoly bankruptcy ends the game for players who declare bankruptcy. A real-life bankruptcy, on the other hand, gives you a fresh start. This fresh start means different things to different people in different situations.
Breathing room is an essential element of a fresh start. Unfortunately, since the Supreme Court has diluted some protections in the Fair Debt Collection Practices Act and other federal law provisions, this breathing room is hard to come by. The automatic stay is normally the only way to stop adverse creditor actions like:
- Utility shutoff
- Wage garnishment
- Bank account levy
Typically, Section 362 of the Bankruptcy Code (the automatic stay) takes effect instantly and stays in effect until the judge closes the case. Creditors can normally only bypass the automatic stay if the debtor threatens the property at stake (for example, if you tell them "I'm going to burn down my house rather than have you take it from me"). If you have filed bankruptcy within the past six months, the automatic stay might be limited.
The automatic stay is only one of bankruptcy's benefits. It is also impossible to get a fresh start if you are still paying unsecured debts, such as:
- Payday loans
- Credit cards
- Signature loans
- Medical bills
Fortunately, the bankruptcy judge can discharge these debts. “Discharge" means the judge eliminates the legal obligation to pay the debts.
Discharge, or rather the possibility of discharge, also gives your lawyer leverage in debt negotiations. Creditors know that unless they make a favorable deal, you could legally walk away from the debt, leaving them with little or nothing. That makes them more likely to work out a deal that is beneficial to you.
Types of South Carolina Consumer Bankruptcies
Credit cards and the other aforementioned obligations are unsecured debts, meaning their is no collateral attached to the loan. Put simply, in an unsecured loan the lender does not have the option of taking back property if you fail to make payments on time. Chapter 7 discharges unsecured debts in as little as six months. Generally, these debtors may choose which obligations the judge discharges and which ones they want to pay. For example, if Betty has a good relationship with her doctor, she might want to pay his bill, even though it's dischargeable in bankruptcy.
Chapter 13 is usually ideal for people dealing with past-due mortgage payments and other secured debt delinquency. This form of bankruptcy gives these debtors up to five years to erase these obligations. Since the Automatic Stay remains in effect, creditors must accept the payment plan proposal, as long as it meets certain legal requirements.
A “Chapter 20" bankruptcy is available in some jurisdictions. This type of bankruptcy isn't in the bankruptcy code, but involves filing for Chapter 13 bankruptcy after initially filing for Chapter 7. It is easiest to understand using an example.
Assume Bruce files Chapter 7 mostly to eliminate back taxes. However, the judge rules the debt cannot be discharged. Taxes and certain other priority unsecured debts (like student loans) are only forgivable in some situations. Many courts would allow Bruce to immediately file a Chapter 13. He would be ineligible for a discharge. But Bruce does not want or need a discharge. He just needs time to repay the IRS, which is what Chapter 13 gives him.
Most people qualify for bankruptcy in the Palmetto State. However, there are specific eligibility requirements for the different types of bankruptcy.
All debtors must meet nonfinancial and financial eligibility requirements. You must complete a pre-filing credit counseling course as well as a post-filing credit management class. These brief and inexpensive courses are typically available online.
Financially, Chapter 7 debtors must meet the means test. Their annual incomes must be below average for that state. As of November 1, 2020, a South Carolina family of four must earn less than $85,227. If you are at or above that level, you still have legal options, even a Chapter 7, with a lawyer.
Debt ceilings apply in Chapter 13. As of January 1, 2021, these debtors must have less than $400,000 in unsecured debt and $1.4 million in secured debt. These amounts usually change frequently so be sure to check with your bankruptcy lawyer.
The informal filing requirements vary in different jurisdictions. Since these rules are unwritten, only an experienced South Carolina bankruptcy lawyer is familiar with them.
As mentioned, Chapter 7 is for people who need a fresh start to escape the burden of unsecured debt. Unless this burden is measurable (the debtor is in the red every month on an income/expense basis), the trustee (person who oversees the bankruptcy for the judge) might question the need for Chapter 7.
The opposite informal qualification usually applies in a Chapter 13. These debtors must have sufficient disposable income to fund a rather large monthly debt consolidation payment. This payment must erase all allowed claims, mostly secured debt delinquency, within the time prescribed by law.
On a related note, the trustee does more than review paperwork and set up payment plans. Trustees normally request obscure financial documents with little notice. Unless debtors timely produce these documents, the judge could dismiss the case.
Outside bankruptcy, creditors often do not need court orders to seize your hard-earned assets. In a bankruptcy, property exemptions protect your property.
South Carolina doesn't allow debtors to use federal exemptions. The formal state bankruptcy exemptions, which are found in the Civil Remedies and Procedures Code, include the following:
- Homestead exemption: South Carolina law protects up to $60,975 of equity for single bankruptcy filers. Unless you have owned your home for more than half the loan period, you probably have little home equity. This is good for bankruptcy filers, as it means they may be able to keep their home.
- Motor vehicle: This same principle applies to the $6,100 single motor vehicle equity exemption. Most used vehicles have almost no dollar value, especially if they need minor work or have been in a minor accident.
- Personal property: Debtors may protect up to about $9,000 worth of firearms, clothing, jewelry, appliances, and other household goods. The as-is cash value of individual items is usually almost nothing. These values must be declared on Schedule C.
- Retirement accounts: Public and private retirement nest eggs are normally 100 percent exempt, no matter how much money they contain. The exemption might not apply to inherited retirement accounts.
- Government payments: Many families depend almost entirely on VA disability, Social Security, and other government benefits. These payments are 100 percent exempt. On a related note, most insurance payments and personal injury settlements are also exempt.
- Wildcard: South Carolina debtors may apply up to $6,100 of unused exemptions to savings accounts, vacation timeshares, and other nonexempt property. So, even if Samuel does not own a home, he can protect his $6,100 savings account.
Other exemptions include all business partnership property, tools of the trade, and 75 percent of current but unpaid wages.
Bankruptcy exemptions are not necessarily clear cut. Creditors or trustees may object to certain exemptions. Additionally, a little-known bankruptcy loophole called the best interests of creditors rules sometimes applies. Here's an example:
Assume General Ross has an RV in addition to his personal vehicle. The RV, which South Carolina's formal exemptions do not cover, is worth about $1,000. It also needs about $500 in various repairs. Additionally, the trustee budgets $500 for seizing, storing, and marketing the RV.
The law may prohibit the trustee from seizing General Ross' RV. Most likely, seizing it would not be in the best financial interests of the creditors, who do not stand to gain much or anything from it.
How do I start bankruptcy in South Carolina?
Since money is usually tight in these situations, DIY (Do-It-Yourself) bankruptcies are rather popular in South Carolina. The initial forms are available here. In many cases, a DIY bankruptcy is a bad idea. The forms are extremely complex. Furthermore, if there is a motion for turnover or objection to discharge, DIY filers are on their own in court.
A BPP (Bankruptcy Petition Preparer) bankruptcy is a little better. BPPs fill out forms for debtors. But that's all they can do. They cannot tell you how to fill them out. They also cannot represent you in court.
A lawyer can address all these deficiencies. Furthermore, attorneys do much more than fill out forms and stand up for you in court. Only a bankruptcy lawyer can give you solid legal advice about your bankruptcy and non-bankruptcy options. Furthermore, as mentioned, a lawyer is also a good debt negotiator.
Where do I file bankruptcy in South Carolina?
South Carolina's bankruptcy courts are located in Charleston, Columbia, and Spartanburg. DIY and BPP filers must conduct most filing and payment business at these locations during business hours. Lawyers can use the state's ECF (Electronic Case Filing) system.
How much does bankruptcy cost in South Carolina?
Filing fees and professional fees vary in different locations and by type of bankruptcy. The filing fees, which are usually about $350, are sometimes payable in installments. Judges also grant fee waivers in a few cases. As for a South Carolina bankruptcy lawyer's professional fees, payment plans, both pre- and post-petition, are usually available. Sliding scales are also available.
How do I declare bankruptcy in SC?
Debtors must file a petition and schedules. Furthermore, debtors must cooperate with the trustee in all areas. This cooperation usually means attending meetings and court hearings as needed.
What do you lose if you declare bankruptcy?
Most people lose nothing when they declare bankruptcy in South Carolina. The state has very generous property exemptions. Some obscure loopholes, like the best interests of creditors rule, might protect even more of your property.
Is it better to file a Chapter 7 or 13?
Since debtors repay many of their obligations in a Chapter 13 bankruptcy, this type of bankruptcy does not stay on your credit report for as long and looks a little better to some creditors. However, Chapter 7's impact on a credit score is not nearly as bad as some people think it is.
How many years do you have to wait to file a subsequent Chapter 7 bankruptcy?
Job loss and other financial storms usually prompt people to file Chapter 7. These storms often strike more than once. Depending on the exact circumstances, the waiting period for filing a subsequent Chapter 7 is usually six or eight years.
Can you back out of Chapter 13?
Yes, in most cases. Very few bankruptcies are involuntary matters. Almost all of them are voluntary petitions. So, you may withdraw your petition at any time. Debtors also can convert from Chapter 13 to Chapter 7, and vice versa, at almost any time.
Connect with an Experienced Lawyer
The sooner you reach out to an experienced South Carolina bankruptcy lawyer, the sooner you can have the fresh start the Bankruptcy Code guarantees.
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.
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