You may have heard stories of someone who lost their car or house in a Chapter 7 bankruptcy. Usually what happened is that the creditor got the house or car back because the person filing chapter 7 was not able to make the payments.
Occasionally, however, the chapter 7 trustee can take certain property. This happens relatively infrequently in South Carolina - perhaps one case in twenty. Usually the asset is a tax refund or mutual fund not hold in a 401(k) or IRA account.
Most people who file bankruptcy in South Carolina are able to keep their homes and cars (and other property) so long as they can continue to make the payments. The reason it is relatively rare for a chapter 7 trustee to take someone’s property in South Carolina is that South Carolina has laws, known as “exemption laws”, that protect a person’s property from the reach of the chapter 7 trustee.
Prior to 2007 and 2008, the exemption laws in South Carolina were woefully inadequate and left little or no protection for many assets. Now, however, the South Carolina exemption laws allow persons to keep much more of their property while going through chapter 7 bankruptcy.
A few quick examples should make things clear...
Read More Here...Assume John and Mary are married and file a chapter 7 case together. Their house is worth $200,000, the deed is in both names, and the mortgage payoff is $100,000. Even though they have $100,000 of equity in the house, the trustee cannot take it from them so long as they live in the house and have lived in South Carolina for the last two years. South Carolina’s new homestead exemption protects $107,000 of the home equity ($53,350 each person). If they can continue paying the mortgage they can keep the house. Before the law changed only $20,000 of the home equity was protected.
Let’s assume that John owns a truck free and clear with a trade in value of $5,000. Mary drives a $20,000 car and owes the car finance company $15,000. In other words, each person has $5,000 of equity in their car. John and Mary can keep both vehicles in a chapter 7 because South Carolina’s new exemption laws protect just over $5,000 in automobiles equity. Mary will have to continue to pay the car note, of course, but the trustee can’t touch either car. Before the law changed only $$1,200 of car equity was protected.
Similar exemptions exist for household goods (up to $10,000 in value based on flea market value), tools of the trade, retirement accounts (fully exempt), and most every other class of asset.
Suppose, however, that the same couple also owns a boat worth $10,000 and a piece of investment real estate also worth $10,000. Both the boat and the land are titled in both names are free and clear of liens. Until recently, boats, investment property and many other types of property were completely unprotected by any South Carolina exemption and therefore could be taken by a chapter 7 trustee. In 2008, the South Carolina state legislature created a “wildcard exemption” that can be applied to protect up to $10,700 ($5,350 each person) in any asset you chose. In the example above, the John and Mary could keep the boat and offer the investment property to the chapter 7 trustee who would sell it unless he deemed selling it more trouble than it is worth. Alternatively, they could apply the wildcard exemption to protect the land and offer the boat to the chapter 7 trustee.
One final word… Exemption laws and the rules for qualifying for chapter 7 versus chapter 13 are complicated and have been simplified for our purpose here. The exemption laws will not apply to you if you have not lived in South Carolina for the last two years. All decisions should be taken after consultation with an experienced bankruptcy attorney.
The number of seniors who petition for bankruptcy protection from their creditors has increased steadily in recent years. A combination of mounting debt and dwindling resources has forced many seniors to use loans and credit cards to pay for prescriptions, medical co-pays, and basic necessities. The financial stress they are under can become overwhelming. While a young person has the opportunity to rebuild themselves financially, many seniors do not. For them, the relief provided by the bankruptcy law can be dramatic.
The financial decline of seniors often goes unnoticed, even by their loved ones. In an effort to satisfy creditors, many will forego medication, cancel insurance policies and invade retirement accounts. Unfortunately, embarrassment leads many to postpone filing bankruptcy because they think that everyone will find out. Although bankruptcy is a matter of public record and is reflected on the credit report, chances are the only people who will know about the bankruptcy are the creditors and others with whom you have shared information.
The two types of bankruptcy available for most individuals are Chapter 7 and Chapter 13...
Read More Here...Under both chapters 7 and 13, the judge immediately issues a restraining order that halts all collection activities, including lawsuits, phone calls, collection letters, wage garnishments, repossessions and foreclosures. Most people who file under Chapter 7 are able to keep their cars and keep their homes so long as they can continue to make the payments. In the typical case, the judge signs an order that wipes-out credit card debts, medical debts, personal loans, payday loans and debts to finance companies. In many cases, old tax debts are also discharged under chapter 7. Debts not discharged through Chapter 7 include child support, alimony, student loans and recent tax debts.
Chapter 13 is a repayment plan in which the person filing makes a monthly payment to a bankruptcy trustee who distributes the money back to the creditors. It is available to someone who earns too much money Chapter 7 and also for homeowners who want to keep their home but are facing foreclosure.
Filing bankruptcy, however, is not for everyone. Just because someone is in financial distress and unable to pay their bills does not necessarily mean they should file for bankruptcy. A creditor has little leverage over a person who has little income and owns no real estate. Creditors cannot have you arrested and taken to jail for not paying a debt, nor can creditors garnish social security checks. Most seniors living in assisted-living communities would fall under this category and the financial benefit of bankruptcy may be marginal for such individuals.
In sum, while fixed incomes that fail to keep pace with inflation have been driving up the number of seniors who file bankruptcy, it is not for everyone. Those with few assets that can stomach the phone calls and collection efforts may see little benefit in filing. On the other hand, the bankruptcy can still be a worthwhile experience if it brings peace of mind and restores a feeling of control over one’s life. Contact us today to get started down the road to peace of mind and a fresh start!
At its core, bankruptcy is designed to give the debtor peace of mind by immediately stopping all collection efforts, including harassing phone calls, lawsuits and threatening collection letters.
In addition to peace of mind, bankruptcy is designed to provide a fresh start by eliminating credit card debt, medical debts and in many cases, tax debts and judgments; liens that creditors often place on your property.
Most people considering bankruptcy have two options: Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy typically discharges the unsecured debts and certain secured debts as well. The person filing offers to turn over to the trustee any nonexempt assets, which the trustee can sell to repay creditors. Fortunately, most people who file bankruptcy in South Carolina are able to keep their homes, keep their cars, and keep all their property.
Chapter 13 Bankruptcy
In Chapter 13 bankruptcy, debtors make monthly payments to a Chapter 13 trustee who distributes the money to creditors. Car loans, tax debts, credit card debt, medical debts – even mortgage arrearages – all go into the Chapter 13 Plan. In South Carolina, the interest rate on unsecured debt goes to zero, and the interest rate on car loans drops to 5.25%.
Read More Here...Bankruptcy is not for everybody
Although the great majority of people filing bankruptcy are able to keep their assets and emerge from bankruptcy unburdened by debt, bankruptcy can be a serious mistake if the person filing bankruptcy owns exotic cars, takes extravagant vacations or has fraudulently transferred assets to family members. Those who are unwilling to truthfully disclose their financial affairs or want to hide income or assets from the trustee should never file bankruptcy.
Exemptions are laws that protect your assets from being taken by the Ch. 7 trustee. Subject to several important exceptions and conditions, the South Carolina exemptions are as follows:
Primary Residence $59,125 of equity is protected. $118,250 if residence is co-owned. Car $5,900 of equity is protected. $11,800 if car is co-owned. Household Items $4,725 of equity is protected. $9,450 if items are co-owned. Cash / Money in Bank $5,900 per person is protected, so long as not exempting your house. $11,800 if the money is co-owned. 401(k) and IRA and other
qualified retirement accounts
Contact us today to get started down the road to peace of mind and a fresh start!