South Carolina Bankruptcy Exemptions

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 What Is a Bankruptcy Exemption?

The term bankruptcy refers to a legal proceeding that is initiated when an individual or business cannot meet their financial obligations. There are different types of bankruptcy, all of which are governed by federal law. Consumer bankruptcy is a specific type of bankruptcy  filed when an individual cannot pay back the debts that they have incurred for their personal needs.

Once the bankruptcy proceeding has been completed, the debtor is no longer liable for the debts that they have incurred. The bankruptcy court will enter a discharge order releasing the individual from the debts; the debtor then has a clean financial slate, although the bankruptcy will remain on their credit report for up to ten years. Bankruptcy can have other lasting consequences, so it should only be used as a last resort during times of extreme financial hardship. There are many considerations an individual should review prior to filing for bankruptcy.

An exemption in bankruptcy is what allows a debtor to keep certain property or assets even after bankruptcy is filed. The specific exemptions are defined by statute, and exempt property cannot be seized or sold to in order to satisfy the debts of the person filing for bankruptcy.

In Chapter 7 bankruptcy proceedings, exemptions help determine which property the debtor will get to keep after the bankruptcy discharge has been granted. This is how bankruptcy exemptions help debtors protect their property after a bankruptcy. In Chapter 13 bankruptcy proceedings, exemptions help determine how much the debtor will have to pay to their unsecured creditors. This can mean the difference between getting their plan confirmed, and getting knocked out of Chapter 13.

What Are Property Exemptions?

Generally speaking, bankruptcy exempt properties refers to any property that cannot be claimed by creditors in order to satisfy the borrower’s debts.  Any other property that can be claimed by creditors is called non-exempt property.  The definition of exempt and nonexempt properties may be different for each state. 

An example of a situation involving exempt property would be if a homeowner has failed to keep up with their mortgage payments. Should the debt become serious enough, the lender could file a lawsuit against the borrower in an attempt to possess their assets for the debt repayment. In such a suit, the creditor cannot collect exempt property, which usually includes household items and the house itself. Alternatively, they may be able to place a lien on the non-exempt items.

Some of the most common examples of exempt property include:

  • Necessary items, such as clothing, furnishings, and household goods/appliances (up to a reasonable amount);
  • Some motor vehicles, up to a specified value;
  • Jewelry, up to a specified value;
  • Tools or instruments of the person’s trade, up to a certain amount;
  • Some unpaid earned wages;
  • Pensions; and
  • Benefits, such as social security, welfare, or unemployment, if those benefits are held in a bank account.

Bankruptcy Property Exemptions in South Carolina

As previously mentioned, bankruptcy property exemptions can vary from state to state. South Carolina law requires that state bankruptcy exemptions be utilized, as opposed to federal standards, due to the fact that the state has opted out of the federal exemptions. Many of South Carolina’s common bankruptcy exemptions are listed below. However, the amounts listed could be higher if filing for bankruptcy as a married couple. 

Bankruptcy property exemptions in South Carolina include:

  • Homestead and Motor Vehicle: In South Carolina, homestead refers to equity in dwelling used as residence. Homestead exemptions are up to $58,225 in a residence or burial plot. Motor vehicle exemptions, or equity in an automobile, is $5,825; and
  • Personal Property: Up to $4,650 in the following categories of personal property:
    • Household goods;
    • Furniture;
    • Appliances;
    • Books;
    • Clothing;
    • Musical instruments; and
    • Animals, and/or crops; 
  • Jewelry and Hearing Aids: Up to $1,175 in jewelry, as well as health aids such as a wheelchair;
  • Tools of the Trade: This exemption is up to $1,750 in implements, books, and other professional tools;
  • Cash: If there is no homestead or burial exemption, there is an exemption of up to $5,825 in cash or liquid assets;
  • Insurance: This exemption covers up to $50,000 in group life insurance proceeds, as well as any life insurance or annuity contract that is specifically exempt from creditors. Life insurance benefits after a death and fraternal benefit society benefits are also exempt. Most unmatured life insurance contracts are considered to be exempt. Up to $4,500 in dividends, interest, or cash value of life insurance are exempt, as are accident, disability, or illness benefits;
  • Pensions and Retirement: Tax exempt retirement accounts are obviously exempt property. ERISA and pension fund benefits are considered to be exempt, as well as public employee pensions. Assembly member, police, firefighter, judge, and solicitor pensions are also exempt; 
  • Public Benefits: This includes public assistance, unemployment compensation, Workers’ compensation, Veterans’ benefits, Social Security benefits, and Crime victims’ compensation;
  • Alimony and Child Support Awards;
  • Other: Some other various exemptions could include college investment program trust funds, personal injury or wrongful death proceeds if you relied on the decedent for support, and property shared in a business partnership; and/or
  • Wildcard: A wildcard is an exemption for personal property of your choice. In South Carolina, this exemption covers up to $5,825 in any property.

A South Carolina bankruptcy lawyer will be most knowledgeable in terms of bankruptcy exempt property. If you would like more information on how to file bankruptcy in South Carolina, please consult an attorney in your area. 

Are There Any Other Considerations When Filing for Bankruptcy in South Carolina?

An exemption limit applies to any equity you have in property, and limits the amount of equity that is exempt. Equity refers to the difference between the fair market value of the property and the unpaid balance on the property. An example of this would be how a home valued at $500,000 with a loan of $450,000 has an equity value of $50,000. If the state’s homestead exemption is $50,000 or greater, the debtor would be exempt from liquidating the $50,000 equity in the home in order to pay off their debts.

There are other factors that can affect what your limit will be, depending on where you live. Marriage may allow couples in some states to double their exemption limits. Filing with “head of household” status, or having a number of dependents, may also increase some exemption amounts.  In some states, senior citizens may have a higher exemption limit on homestead, personal property, or other items in comparison to other states. Disability may also raise your exemption limit, especially for motor vehicles.

A creditor may attempt to claim a debtor’s exempt property. This frequently occurs over the classification of property as non-exempt. In such cases, the debtor must prove that the property is in fact exempt, and that the creditor has no claim in it.

In South Carolina, a Chapter 7 bankruptcy filing costs $306, whereas a Chapter 13 will cost $281. Bankruptcy will not generally wipe out money owed for child support, alimony, fines, and some taxes. It will not wipe out debts that are not listed on the bankruptcy petition. Under South Carolina law, there are several other debts that may not be wiped out by bankruptcy proceedings, so it is important to consult with a local attorney before taking any action.

Do I Need a Bankruptcy Lawyer?

If you are considering filing for bankruptcy in South Carolina, it would be in your best interests to consult with a South Carolina bankruptcy lawyer. A skilled and knowledgeable attorney will be aware of local laws regarding bankruptcy, including what property you may own that will be exempt. An experienced and local bankruptcy attorney will also be able to represent you in court as needed.

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