The decision to file for bankruptcy is never taken lightly, but it can be a lifesaver for people whose livelihoods and homes are at risk from creditors. Bankruptcy is known for wiping out debts that people are straining to pay. It also provides a way to start fresh.
An experienced bankruptcy attorney can help you navigate the regulations and paperwork necessary to reaching the lifeline that bankruptcy provides. They can show you how to protect your essential assets so you can continue living in your home, working, and get back on your feet.
Ways to Get a Fresh Start Financially
Bankruptcy was designed as a safety valve, an option for a fresh start when people are overwhelmed by debt. Depending upon the type of bankruptcy filed, essential belongings like a vehicle, a home, and retirement accounts are protected from creditors.
Individual filers must choose between Chapter 7 and Chapter 13 bankruptcy, unless they are farmers or fishermen, when Chapter 12 is also available. Each chapter serves the basic purpose of eliminating crushing debt and each allows retention of key possessions, but there are differences among them. Key considerations include:
- Residency requirement. You may file for bankruptcy using South Carolina exemptions if you’ve lived in the state at least two years (730 days).Â
- Automatic stay. When your paperwork is filed with the federal court, an automatic stay is triggered that prevents creditors from calling, garnishing wages, or attempting to put liens on your property for unpaid bills. This stay may stop a foreclosure on your home or repossession of your vehicle long enough for you to negotiate a payment plan with the bank involved. It is in effect throughout the bankruptcy process unless a creditor successfully petitions the court to lift it.
- Choosing a Chapter. Chapter 7 bankruptcy requires a means test and usually involves some liquidation (sale) of non-exempt assets to pay debts. Chapter 13 bankruptcy is for wage earners, allowing the debtor to create a payment plan for their secured or non-dischargeable debt (student loans, child support, alimony).Â
- Exempt assets. Each type of bankruptcy allows a certain dollar amount of exemptions as well as a “wild card” that does not put the debtor over a specific limit. Your primary vehicle, home, and retirement accounts are generally exempt from bankruptcy while other items of value may be sold to repay creditors under Chapter 7. South Carolina homeowners have a $76,125 homestead equity exemption ($152,250 for married couples).
South Carolina exempts over $2,000 in workplace tools, books, and implements, over $1,000 for jewelry, more than $6,000 in personal possessions, and $7,600 vehicle value. Most exemptions are doubled for a couple. (Exemption amounts are adjusted annually.)
- Secured vs. Unsecured Debt. Regardless of the chapter you file, a successful bankruptcy petition usually results in the court wiping out unsecured debts, which typically include credit cards, medical bills, and utilities or phone bills. Secured debts are those with collateral, such as a car loan or mortgage: if you default the lender can repossess the property or vehicle. There are also debts that are difficult or impossible to discharge by law, such as student loans and family court obligations like alimony and child support.Â
- Repayment Plan. Under Chapter 13 bankruptcy the petitioner must file a repayment plan with the bankruptcy trustee. This provides a 3-5 year period to complete payments of unsecured debt.
Bankruptcy can also temporarily halt foreclosure, wage garnishment, or repossession, giving you time to reorganize your finances. Knowing more about bankruptcy and how it works helps people understand that it’s a tool to regain financial solvency, not a punishment.
Your Guide to Peace of Mind
Bankruptcy law can be complex, and the steps you take early in the process can determine how much property you keep. With the guidance of an experienced South Carolina bankruptcy attorney from Lam Law Firm, you can find your way to lower debt and financial freedom. Call for a free consultation.
