Some South Carolina residents facing financial hardship are likely to wonder about the costs associated with bankruptcy. Even if a person can protect their home from foreclosure, reduce interest payments and set up manageable payments on their debt, filing expenses could sometimes make bankruptcy a worse deal than going it alone. Fortunately, bankruptcy itself is not very expensive on the front end, and the marginally higher cost of professional assistance could result in several benefits.
South Carolina residents may find that the debt relief industry doesn't operate like it did 10 years ago. This is because increased regulation has narrowed the number of companies offering debt relief services. In some cases, people have actually had a positive experience using a third party to help negotiate favorable loan terms on their behalf. However, the industry isn't necessarily as good to consumers as it claims to be.
When South Carolina consumers file for personal bankruptcy, the two principal forms are Chapter 7 and Chapter 13. With Chapter 7, a person's non-exempt assets may be liquidated with the proceeds going towards creditors. Chapter 13 allows a restructuring in which a person repays creditors over a period of three or five years. Traditional and Roth IRAs are generally safe from creditors although there is a cap on the amount while the IRS may levy future disbursements from 401(k)s. A person might also want to look into using 401(k) funds to pay the IRS. Self-employed plans are also safe and do not have a cap. However, if a person is getting distributions, this protection on various retirement plans changes.
A Chapter 13 bankruptcy case in South Carolina will give creditors an opportunity to make a claim with the court so that they have a chance to receive payments once a court approves a bankruptcy plan. Late filers, however, could miss their chance to collect payments. A court in another state ruled in June against a creditor holding a tax lien against a couple's house because of a late claim filing.
A May bankruptcy court ruling may make it easier for South Carolina residents to get a better handle on their own debt. According to the U.S. Bankruptcy Court for the Western District of Arkansas, a couple was allowed to surrender their vehicle to their creditor and convert the unpaid balance to an unsecured debt. This was despite the fact that their Chapter 13 bankruptcy plan had already been confirmed.
Those in South Carolina interested in bankruptcy matters or considering bankruptcy may have more to mull over as the U.S. Supreme Court's May 15 decision created a lot of questions. In Midland Funding, LLC v. Johnson, the court decided 5-3 that federal law is not violated when debt collectors file 'stale" claims.
When South Carolina debtors file for a Chapter 13 bankruptcy, they set up a payment plan to repay creditors out of their income over three or five years. The payment plan is approved by a court and administered by a trustee. In some cases, after a payment plan is approved, a mortgage lender might file a claim that lists a different payment amount than what has been approved in the plan. If this is the case, the trustee must pay the amount on the claim and not in the payment plan going forward. However, the trustee is not permitted to make changes to the payment plan itself.
If someone files for Chapter 13 bankruptcy, they may not be able to immediately see their payment plan show up on their credit report. A woman in California filed for bankruptcy and successfully submitted a repayment plan in April of 2015. Repayment plans, which are required for Chapter 13 filings, outline how the debtor will pay off certain creditors in a three- to five-year period. Debts that are remaining are normally discharged.
South Carolina residents who are considering filing for Chapter 13 bankruptcy might be interested to learn that in another state, a couple was not permitted to exclude unemployment payments from their current monthly and disposable income. With Chapter 13 bankruptcy, a debtor may keep some assets while paying them off under an approved payment plan. In New Mexico, a couple argued that the unemployment payments should be exempt because they are a benefit under the Social Security Act.
When individuals or married couples file Chapter 13 bankruptcy petitions in South Carolina, they are expected to submit payment plans showing how much income they earn and the portion of this money that will be applied to their outstanding obligations. Checks and balances have been built into the system to make sure that creditors are not taken advantage of, and Chapter 13 payment plans must withstand the scrutiny of a bankruptcy judge. Judges can be difficult to please, and they sometimes raise objections even when all of the parties involved are in agreement.