Make sure you understand your rights as a debtor
Under federal law, people who are dealing with overwhelming debt have the opportunity for a fresh start. Fundamentally, that’s what bankruptcy is, and it’s an option to consider if you can’t keep up with your payments or pay down your debts. The bankruptcy process can be difficult to understand if you’ve never gone through it before.
Here are some key facts that South Carolina debtors should know.
There are two main types of bankruptcy: Chapter 7 and Chapter 13
Two types of bankruptcy are available for consumers. The first is Chapter 7 bankruptcy, also known as “liquidation bankruptcy” (although that’s somewhat of a misnomer). If you qualify for Chapter 7, then you may be eligible to get most of your debts discharged (wiped out). Chapter 7 is usually a good option for people with unsecured debt such as credit cards, personal loans, and/or medical debt.
The other type of bankruptcy is Chapter 13, also known as “reorganization bankruptcy.” In Chapter 13, the bankruptcy court reorganizes your debts into a repayment plan with an affordable monthly payment. After making those payments for three to five years, your remaining debts are discharged. Chapter 13 is a longer process than Chapter 7, but it’s available to people with higher incomes who can’t qualify for Chapter 7, and it works well for secured debt such as mortgages and auto loans.
There is just one court in South Carolina where you can file for bankruptcy
Bankruptcy cases are heard in special federal courts that only handle bankruptcy matters. In South Carolina, that is the United States Bankruptcy Court for the District of South Carolina. The Court has three locations in Charleston, Columbia, and Greenville, SC.
You can file for bankruptcy and still keep some or all of your property
While Chapter 7 bankruptcy is sometimes called “liquidation bankruptcy,” most debtors don’t actually have to liquidate (sell) any property. That’s because there are “exemptions” in the law that allow you to keep property below a certain threshold. In most Chapter 7 cases, those exemptions cover all of the debtor’s property, so there is nothing left to be sold. If you own more property than the exemption covers, it may be more in your interest to file for Chapter 13 bankruptcy, which allows you to keep your property. This is particularly true if you own a house.
Bankruptcy immediately stops all debt collection activities
As soon as you file for bankruptcy, the court will issue an order called the “automatic stay” that puts a stop to collection activities while your bankruptcy case is pending. That means no more calls from debt collectors, no wage garnishment, no repossession, and so on. Creditors can go to court and ask to lift the automatic stay in some circumstances, but even then, it buys you at least a month and usually longer. Otherwise, the court order protects you from collection activity until your bankruptcy is resolved and your debts are discharged.
Bankruptcy does affect your credit, but it doesn’t ruin it forever
Bankruptcy goes on your credit report, and it stays there for a long time: up to 10 years for Chapter 7 and up to seven years for Chapter 13. However, bankruptcy also clears your debts and allows you to start rebuilding your finances, which will have other, more positive effects on your credit score. In our experience, most of our clients see their credit scores start to improve within a year or two of filing for bankruptcy. If bankruptcy puts you on the path to financial sustainability and responsible use of credit, it may help you improve your score in the long run.
Talk to an experienced South Carolina bankruptcy attorney today
Filing for bankruptcy is a big step. It’s not always clear whether it’s in your interest to file bankruptcy at all or whether Chapter 7 or Chapter 13 is right for you. That’s why it’s important to get legal advice as soon as possible.
We’d be honored to listen to your story and explain your legal rights and options free of charge. Schedule your free consultation with Benjamin R. Matthews & Associates today.
"Mr. Matthews and his team took the time to understand my situation and helped to understand the process. Everyone in the office were respectful and patient with my questions and concerns. If the need arises in the future I will definitely be giving them a call." — Wendy W., ⭐⭐⭐⭐⭐